71. What is the best definition of an accounting period?
A. Any 12-month period
B. The calendar year
C. The period between any two balance sheet dates
D. The period in which the major income-producing activity occurs
E. The period between any two income statement dates
72. Which of the following concepts best characterizes the accrual basis of accounting?.
A. Conservatism
B. Matching
C. Understandability
D. Going concern
E. Unit of measurement
73. The intermingling of performance of one period with that of preceding or succeeding periods is characteristic of which basis of accounting?
Cash basis Accrual basis
A. Yes Yes
B. Yes No
C. No Yes
D. No No
74. Under accrual accounting, revenue is recognized when
A. the firm has performed all, or most of, the services it expects to provide
B. the firm has received cash, or some other asset such as a receivable, whose cash-equivalent value it can measure with reasonable precision
C. the firm has significant uncertainty about the amount and timing of the cash inflows and outflows from the sales transaction
D. both a and b must be present
E. none of the above
75. The accrual basis of accounting is often contrasted with the cash basis of accounting. Which of the following is true of the cash basis of accounting?
A. the cash basis is not subject to manipulation
B. most larger companies use the cash basis of accounting
C. the cash basis of accounting provides a strong basis to determine the total assets of the company
D. the cash basis provides an inferior picture of operating performance
E. the cash basis provides an superior picture of operating performance
76. Over sufficiently long time periods, the amount of net income equals
A. cash inflows minus cash outflows from operating activities
B. cash inflows minus cash outflows from operating and investing activities
C. cash inflows minus cash outflows from operating, investing, and debt servicing activities
D. cash inflows minus cash outflows from operating and debt servicing activities
E. cash inflows minus cash outflows from investing and debt servicing activities
77. The net income for a period and the financial position at the end of the period are
A. interrelated
B. independent
C. relevant
D. irrelevant
E. autonomous
78. Which equation is correct?
A. Assets = Liabilities + Contributed Capital - Dividends
B. Shareholders' Equity = Assets - Liabilities + Contributed Capital + Net Income
C. Shareholders' Equity = Contributed Capital + Retained Earnings + Net Income - Dividends
D. Retained Earnings = Net Income + Dividends
E. none of the above
79. Revenue and expense accounts
A. are permanent accounts
B. are temporary accounts
C. reflect cumulative changes in each account since the organization of the firm
D. record all cash receipts and cash disbursements
E. none of the above
80. Recognition of revenue usually occurs when
A. the firm pays for the related expenses
B. the revenue is earned, such as at the time of the sale or delivery of the goods
C. a signed, legally binding contract is received
D. an advance payment for the goods is received
E. none of the above
