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Financial and Managerial Accounting: The Basis for Business Decisions, 12/e

Jan R. Williams, University of Tennessee
Susan F. Haka, Michigan State University
Mark S. Bettner, Bucknell University
Robert F. Meigs

The Accounting Cycle: Capturing Economics Events

Multiple Choice Quiz

Please answer all questions


1	The realization principle indicates that revenue usually should be recognized and recorded in the accounting records:
		A)	When goods are sold or services are rendered to customers.
		B)	When cash is collected from customers.
		C)	At the end of the accounting period.
		D)	Only when the revenue can be matched by an equal dollar amount of expenses.


2	The matching principle is best demonstrated by:
		A)	Using debits to record decreases in owner's equity and credits to record increases.
		B)	The equation A = L + OE.
		C)	Allocating the cost of an asset to expense over the periods during which benefits are derived from ownership of the asset.
		D)	Offsetting the cash receipts of the period with the cash payments made during the period.


3	The matching principle:
		A)	Applies only to situations in which a cash payment occurs before an expense is recognized.
		B)	Applies only to situations in which a cash receipt occurs before revenue is recognized.
		C)	Is used in accrual accounting to determine the proper period in which to recognize revenue.
		D)	Is used in accrual accounting to determine the proper period for recognition of expenses.


4	The reason that both expenses and dividends are recorded by debit entries is that:
		A)	All dividend and expense transactions involve offsetting credit entries to the Cash account.
		B)	Both expenses and dividends are offset against revenue in the income statement.
		C)	Both expenses and dividends reduce owner's equity.
		D)	The statement is untrue-expenses are recorded by debits, but withdrawals are recorded by credits to the owner's drawing account.

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