Horngren’s Accounting,11e (Miller-Nobles)
Chapter 3 The Adjusting Process
Learning Objective 3-1
1) The major difference between a cash basis accounting system and an accrual basis accounting
system is the timing of recording revenues and assets.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
2) Recipes, Inc. purchased $2,000 of supplies on account. Under the accrual basis of accounting,
no entry is made until the amount is paid.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
,3) In cash basis accounting, revenue is recorded when cash is received, and expenses are
recorded when they are paid.
Answer: TRUE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
4) Under accrual basis accounting, revenue is recorded only when cash is received.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
5) Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is
received.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
,PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
6) Under accrual basis accounting, an expense is recorded only when cash is paid.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
7) Under cash basis accounting, an expense is recorded only when cash is paid.
Answer: TRUE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
8) Generally Accepted Accounting Principles (GAAP) require the use of accrual basis of
accounting.
Answer: TRUE
, Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
9) If a company is using accrual basis accounting, when should it record revenue?
1. A) when cash is received, even though services may be performed at a later date
2. B) when services are performed, even though cash may be received at a later date
3. C) when services are performed and cash is received
4. D) when cash is received, 30 days after the completion of the services
Answer: B
Diff: 1
LO: 3-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
10) When does a company account for revenue if it uses cash basis accounting?
1. A) when services are performed, even though cash may be received at a later date
2. B) when cash is received after the service is performed
Chapter 3 The Adjusting Process
Learning Objective 3-1
1) The major difference between a cash basis accounting system and an accrual basis accounting
system is the timing of recording revenues and assets.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
2) Recipes, Inc. purchased $2,000 of supplies on account. Under the accrual basis of accounting,
no entry is made until the amount is paid.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
,3) In cash basis accounting, revenue is recorded when cash is received, and expenses are
recorded when they are paid.
Answer: TRUE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
4) Under accrual basis accounting, revenue is recorded only when cash is received.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
5) Under cash basis accounting, revenue is recorded when it is earned, regardless of when cash is
received.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
,PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
6) Under accrual basis accounting, an expense is recorded only when cash is paid.
Answer: FALSE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
7) Under cash basis accounting, an expense is recorded only when cash is paid.
Answer: TRUE
Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
8) Generally Accepted Accounting Principles (GAAP) require the use of accrual basis of
accounting.
Answer: TRUE
, Diff: 1
LO: 3-1
AICPA Functional: Measurement
PE Question Type: Concept
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
9) If a company is using accrual basis accounting, when should it record revenue?
1. A) when cash is received, even though services may be performed at a later date
2. B) when services are performed, even though cash may be received at a later date
3. C) when services are performed and cash is received
4. D) when cash is received, 30 days after the completion of the services
Answer: B
Diff: 1
LO: 3-1
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2 : What Is the Difference Between Cash Basis Accounting and Accrual Basis Accounting?
(H1)
10) When does a company account for revenue if it uses cash basis accounting?
1. A) when services are performed, even though cash may be received at a later date
2. B) when cash is received after the service is performed
