Question

c. Expenses decrease stockholders' equity. d. Expenses are a negative factor in the computation of net income 26. A revenue account a is increased with a debit b is decreased with a credit c. is increased with a credit. d. has a normal balance of a debit. 27. The Dividends account a. appears on the income statement along with the expenses of the business b mast show transactions every accounting period. c. is increased with debits and decreased with credits d. is not a proper subdivision of stockholders' equity. 28. Which of the following is not generally an accounting time period a. b. A weck. A month Aquarter A year d. 29. The revenue recognition principle dictates that revenue should be recognized in the accounting records when cash is received b. when the performance obligation is satisfied. c. at the end of the month d. in the period that income taxes are paid 30. The expense recognition principle matches: a customers with businesses b. expenses with revenues. c assets with liabilities. d. creditors with businesses 31. A flower shop makes a large $1.000 sale on 11/30, sends the customer a statement on 125; and receives a check on 12/10. The flower shop follows GAAP and applies the revenue recognition principle. When should it recognize the $1.000 sale! a December 5 b. December 10 c. November 30 d. December 32. Why do generally accepted accounting principles require the application of the revenue recognition principle? a. Failure to apply the revenue recognition principle could lead to a misstatement of revenue b. It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. c Recording revenue when cash is received is an objective application of the revenue recognition principle. d. Accounting software has made the revenue recognition easy to apply 33. Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c events that change a company's financial statements are recognized in the period they occur wher than in the period in which cash is paid or received. d the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared wide generally accepted accounting principles.

Answer 1

Solution 26:

A revenue account is "increased with a credit"

Hence option c is correct.

Solution 27:

The dividends account "Is increased with debits and decreased with credits"

Hence option c is correct.

Solution 28:

A week is not generally an accounting time period.

Hence option a is correct.

Solution 29:

The revenue recognition principal dictates that revenue should be recognized in the accounting records "When the performance obligation is satisfied"

Hence option b is correct.

Solution 30:

The expense recognition principal matches "Expenses with revenues"

Hence option b is correct.

Solution 31:

Revenue of $1,000 sale should be recognized on the date of sale i.e. November 30

Hence option c is correct.

Solution 32:

Generally accepted accounting principles require the application of revenue recognition principle because "Failure to apply the revenue recognition principle could lead to misstatement of revenue"

Hence option a is correct.

Solution 33:

Under the accrual basis of accounting "Events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received"

Hence option c is correct.