Chapter 3

Question 1

timing period assumption

Answer 1

accountants divide the economic life of a business into artificial time periods

Question 2

interim periods

Answer 2

monthly and quarterly time periods

Question 3

fiscal year

Answer 3

accounting time period that is one year in length ( 2011.1.1-2012.1.31)

Question 4

calendar year

Answer 4

1.1 to 12.31

Question 5

Accrual basis accounting

Answer 5

Transactions recorded in the periods in which the events occur (rather than when they receive cash or paid )

Question 6

Cash basis accounting

Answer 6

Revenues are recorded when cash is received

Expenses are recorded when cash is paid

Question 7

Revenue recognition principle

Answer 7

recognize revenue in the accounting period in which the performance obligation is satisfied

Question 8

expense recognition principle

Answer 8

match expenses with revenues in the period when the company makes efforts to generate those revenues

Question 9

Types of Adjusting entries

Answer 9

Deferrals and Accruals

Question 10

Deferrals

Answer 10

expenses or revenues that are recognized at a date later than the point when cash was originally exchanged

Question 11

preparing the adjusted trial balance purpose

Answer 11

to prove the equality of debit balances and credit balances in the ledger

is the primary basis for the preparation of financial statements