COVID Company recognizes revenue in the period in which the account receivable is collected in cash, rather than in the period in which it records an asset for the related account receivable. COVID's practice is an example of: Select one: a. Economic entity. b. Accrual accounting c. None of the given ANSWER is correct. d. Cash basis accounting e. The matching principle.

COVID Company recognizes revenue in the period in which the account receivable is collected in cash, rather than in the period in which it records an asset for the related account receivable. COVID's practice is an example of: Select one: a. Economic entity. b. Accrual accounting c. None of the given ANSWER is correct. d. Cash basis accounting e. The matching principle.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter3: Analyzing And Recording Transactions

Section: Chapter Questions

Problem 26MC: What is the impact on the accounting equation when an accounts receivable is collected? A. both...

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Revenues and expenses must be recorded in the accounting period in which they were earned or incurred, no matter when cash receipts or outlays occur under which of the following accounting methods? A. accrual basis accounting B. cash basis accounting C. tax basis accounting D. revenue basis accounting
What is the impact on the accounting equation when an accounts receivable is collected? A. both sides increase B. both sides decrease C. only the Asset side changes D. the total of neither side changes
Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.
Which of the following statements is false? A. Noncash activities should be reported in accrual basis financial statements. B. Net cash flow from operating activities relates to normal business operations. C. Net income usually equals net cash flow from operating activities. D. The statement of cash flows is an essential part of the basic financial statements.
Which of the following sentences regarding the statement of cash flows is false? The statement of cash flows describes the companys cash receipts and cash payments for a period of time. The statement of cash flows reconciles the beginning and ending cash balances shown on the balance sheet. The statement of cash flows reports cash flows in three categories: cash flows from business activities, cash flows from investing activities, and cash flows from financing activities. The statement of cash flows may be used by creditors to asses the creditworthiness of a company.
For each of the following transactions, state which special journal (Sales Journal, Cash Receipts Journal, Cash Disbursements Journal, Purchases Journal, or General Journal) and which subsidiary ledger (Accounts Receivable, Accounts Payable, neither) would be used in recording the transaction. A. Sold inventory for cash B. Issued common stock for cash C. Received and paid utility bill D. Bought office equipment on account E. Accrued interest on a loan at the end of the accounting period F. Paid a loan payment G. Bought inventory on account H. Paid employees I. Sold inventory on account J. Paid monthly insurance bill
Which of these transactions would not be part of the cash flows from the operating activities section of the statement of cash flows? A. credit purchase of inventory B. sales of product, for cash C. cash paid for purchase of equipment D. salary payments to employees
What is the impact on the accounting equation when a payment of account payable is made? A. both sides increase B. both sides decrease C. only the Asset side changes D. neither side changes
The matching principle in accounting requires the matching of debits and credits.
Adjustments to the company’s records based on the hank reconciliation are required for: A. additions to the cash balance according to the company’s records. B. deductions from the cash balance according to the Company’s records. C. both A and B. D. neither A nor B.
Match the following assertions with their associated description: (a) existence/occurrence, (b) completeness. (c) rights and obligations, (d) valuation or allocation, (e) presentation and disclosure. 1. Cash accounts arc properly classified on the balance sheet and disclosed in the notes to the financial statements. 2. Cash balances exist at the balance sheet date. 3. The recorded balances reflect the true underlying economic value of those assets. 4. The company has title to the cash accounts as of the balance sheet date. 5. Cash balances include all cash transactions that have taken place during the period.