Question

What is the amount of equity on September 1 and September A. $86,000; 54,000 B. 586,000; 5106,000 C. $74,000; $106,000 D. $74,000, $4,000 E None of these answers is correct 25. The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures revenue as the amount of cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services is called the A. going concern principle B. historical cost principle C. revenue recognition principle D. currency principle E business entity principle 26. What is double entry accounting? A. An accounting system that disregards the accounting equation, A=L+E B. An accounting system that records the effects of transactions and other events in at least two accounts with equal debits and credits C. An accounting system in which each transaction affects and is recorded in two or more accounts with unequal debits and equal credits D. An accounting system in which the sum of the debit account balances never equals the sum of the credit account balances E. An accounting system in which errors never occur 27. An asset created by a payment for economic benefits that does not expire until some later ti A. recorded as a debit to an unearned revenue account B. recorded as a debit to a prepaid expense account C. recorded as a credit to an unearned revenue account D. recorded as a credit to a prepaid expense account E. not recorded in the accounting records 28. The following transactions occurred during July for Hurley Services:

Answer 1

1. Requires revenue to be recognized at the time it is earned - revenue recognition.

Revenue recognition is the principle which requires the revenue ti be recognized with it is earned and not when it is received. Example : Cash received from customer in advance for sales to be made in future.

Sales is recognized only when actually it is made .

2. Double entry system of accounting:

An accounting system that records the effect of transaction and other events in at least two accounts with equal debits and credits . That is for every debit there is a credit entry . Debit = credit for each transaction.

3. An asset created by payment of economic benefit does not expires until Credit is recorded  for prepaid expense .

Example : prepaid insurance : journal entry

Prepaid insurance

cash A/c

when the expense is expired the journal entry is :

insurance

prepaid insurance A/c

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