Question

1) If a company is using accrual basis accounting, when should it record revenue? A) when cash is received, even though services may be performed at a later date B) when services are performed, even though cash may be received at a later date C) before services are performed D) when cash is received, 30 days after the completion of the services 2) When does a company account for revenue if it uses cash basis accounting? A) when services are performed, even though cash may be received at a later date B) before services are performed C) when the services are being performed D) when cash is received, either prior to, at the time of, or after the services are performed 3) A company receives payment from one of its customers on August 5 for services performed on July 21. Which of the following entries would be recorded if the company uses accrual basis accounting? A) Cash 1,000 Accounts Receivable 1,000 B) Accounts Payable 1,000 Cash 1,000 C) Cash 1,000 Service Revenue 1,000 D) Service Revenue 1,000 Cash 1,000 4) Which of the following statements is true of accrual basis accounting? A) Accrual basis accounting is allowed by Generally Accepted Accounting Principles (GAAP). B) Accrual basis accounting records expenses only when cash has been paid for them. C) Accrual basis accounting records revenue only when cash is received. D) It always results in greater net income than cash basis accounting. 5) Which of the following would result in an increase in income under the accrual method of accounting, but would not result in an increase in income under the cash basis accounting? A) Purchase of supplies for cash B) Performance of services on account C) Use of supplies purchased earlier D) Receipt of cash for services that were performed earlier on account 6) Revenue is said to be earned when the business has: A) entered into an agreement with the customer about the goods or services to be delivered. B) passed a journal entry to record revenue. C) received cash from the customer before goods or services are delivered. D) delivered a good or service to the customer.

Answer 1

	A1)	option b
		when service is performed ,even though cash may be received
		at a later date
	A2)	option D
		when cash is received ,either prior to,at that time of,or after
		the services are performed
	A3)	option A
		cash		1,000
		Account receivable			1,000
	A4)	option a
		Accrual basis accounting is allowed by GAAP
	a5)	option B
		performance of services on account
	A6)	option D
		delivered a good or service to the customer