ACCT 215 CHAPTER 3 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
Accounting cycle - Answers recurring steps performed each accounting period, starting with analyzing
transactions and continuing through the post-closing trial balance (or reversing entries) p. 122
accounting periods - Answers length of time covered by financial statements; also called reporting
period.
accrual basis accounting - Answers accounting system that recognizes when earned and expenses
when incurred; the basis for GAAP.
accrued expenses - Answers costs incurred in a period that are both unpaid and unrecorded;
adjusting entries for recording accrued expenses involve increasing expenses and increasing liabilities.
p. 111
accrued revenues - Answers revenues earned in a period that are both unrecorded and not yer
received in cash (or other assets); adjusting entries for recording accrued revenues involve increasing
assets and increasing revenues. p. 113
adjusted trial balance - Answers list of accounts and balances prepared after period-end adjustments
are recorded and posted.
adjusting entry - Answers journal entry at the end of an accounting period to bring an asset or liability
account to its proper amount and update the related expense or revenue account. p. 104
annual financial statements - Answers financial statements covering a one-year period; often based
on a calendar year, but any consecutive 12-month (or 52 week) period is acceptable.
book value - Answers asset's acquisition costs less its accumulated depreciation (or depletion or
amortization); also sometimes used synonymously as the carrying value of an account.
cash basis accounting - Answers accounting system that recognizes revenues when cash is received
and records expenses when cash is paid.
classified balance sheet - Answers balance sheet that presents assets and liabilities in relevant
subgroups, including current and noncurrent classifications. p. 123
closing entries - Answers entries recorded at the end of each accounting period to transfer end-of-
period balances in revenue, gain, expense, loss, and withdrawl (dividend for corporation) accounts to
the capital account (to retained earnings for a corporation). p. 119
closing process - Answers necessary end of period steps to prepare the accounts for recording the
transactions of the next period.
contra account - Answers account linked with another account and having an opposite normal
balance; reported as subtraction from the other accounts balance. p. 107
current assets - Answers cash and other assets expected to be sold, collected, or used within one
year or the company's operating cycle, whichever is longer.
current liabilities - Answers obligations due to be paid or settled within one year or the company's
operating cycle, whichever is longer.
current ratio - Answers ratio used to evaluate a company's ability to pay its short-term obligations,
calculated by dividing current assets by current liabilities. p. 128
depreciation - Answers expenses created by allocating the cost of plant and equipment to periods in
which they are used; represents the expense using the asset.
expense recognition (or matching) principle - Answers prescribes expenses to be reported in the
same period as the revenues that were earned as a result of the expense.
fiscal year - Answers consecutive 12 month or 52 week period chosen as the organization's annual
accounting period.
income summary - Answers temporary account used only in the closing process to which the
balances of revenue and expense accounts, including any gains or losses, are transferred; its balance
is transferred to the capital account (or retained earnings for a corporation).
intangible assets - Answers long-term assets (resources) used to produce or sell products or services;
usually lack physical form and have uncertain benefits. p. 125
interim financial statements - Answers financial statements covering periods of less than one year,
usually based on one, three, or six month periods.
long-term investments - Answers long term assets not used in operating activities such as notes
receivable and investments in stocks and bonds.
long-term liabilities - Answers obligations not due to be paid within on year or the operating cycle,
whichever is longer.
Accounting cycle - Answers recurring steps performed each accounting period, starting with analyzing
transactions and continuing through the post-closing trial balance (or reversing entries) p. 122
accounting periods - Answers length of time covered by financial statements; also called reporting
period.
accrual basis accounting - Answers accounting system that recognizes when earned and expenses
when incurred; the basis for GAAP.
accrued expenses - Answers costs incurred in a period that are both unpaid and unrecorded;
adjusting entries for recording accrued expenses involve increasing expenses and increasing liabilities.
p. 111
accrued revenues - Answers revenues earned in a period that are both unrecorded and not yer
received in cash (or other assets); adjusting entries for recording accrued revenues involve increasing
assets and increasing revenues. p. 113
adjusted trial balance - Answers list of accounts and balances prepared after period-end adjustments
are recorded and posted.
adjusting entry - Answers journal entry at the end of an accounting period to bring an asset or liability
account to its proper amount and update the related expense or revenue account. p. 104
annual financial statements - Answers financial statements covering a one-year period; often based
on a calendar year, but any consecutive 12-month (or 52 week) period is acceptable.
book value - Answers asset's acquisition costs less its accumulated depreciation (or depletion or
amortization); also sometimes used synonymously as the carrying value of an account.
cash basis accounting - Answers accounting system that recognizes revenues when cash is received
and records expenses when cash is paid.
classified balance sheet - Answers balance sheet that presents assets and liabilities in relevant
subgroups, including current and noncurrent classifications. p. 123
closing entries - Answers entries recorded at the end of each accounting period to transfer end-of-
period balances in revenue, gain, expense, loss, and withdrawl (dividend for corporation) accounts to
the capital account (to retained earnings for a corporation). p. 119
closing process - Answers necessary end of period steps to prepare the accounts for recording the
transactions of the next period.
contra account - Answers account linked with another account and having an opposite normal
balance; reported as subtraction from the other accounts balance. p. 107
current assets - Answers cash and other assets expected to be sold, collected, or used within one
year or the company's operating cycle, whichever is longer.
current liabilities - Answers obligations due to be paid or settled within one year or the company's
operating cycle, whichever is longer.
current ratio - Answers ratio used to evaluate a company's ability to pay its short-term obligations,
calculated by dividing current assets by current liabilities. p. 128
depreciation - Answers expenses created by allocating the cost of plant and equipment to periods in
which they are used; represents the expense using the asset.
expense recognition (or matching) principle - Answers prescribes expenses to be reported in the
same period as the revenues that were earned as a result of the expense.
fiscal year - Answers consecutive 12 month or 52 week period chosen as the organization's annual
accounting period.
income summary - Answers temporary account used only in the closing process to which the
balances of revenue and expense accounts, including any gains or losses, are transferred; its balance
is transferred to the capital account (or retained earnings for a corporation).
intangible assets - Answers long-term assets (resources) used to produce or sell products or services;
usually lack physical form and have uncertain benefits. p. 125
interim financial statements - Answers financial statements covering periods of less than one year,
usually based on one, three, or six month periods.
long-term investments - Answers long term assets not used in operating activities such as notes
receivable and investments in stocks and bonds.
long-term liabilities - Answers obligations not due to be paid within on year or the operating cycle,
whichever is longer.
