Revenue is recognized when it is earned and expenses when they are incurred, regardless of when cash changes hands when using

accrual accounting

Companies recognize revenue only when the cash has been collected when using ______ accounting

cash basis

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an accrual occurs when

-an expense is recognized before the associated cash is paid
-revenue is recognized before the associated cash is collected

A deferral occurs when an expense is recognized ______ the associated cash is exchanged

after

On the statement of cash flows, issuing stock for cash increases cash flow from ______ activities

financing

accrual accounting

-records expenses when incurred
-recognizes revenue only when earned

Recognizing revenue on account affects the financial statements by increasing

accounts receivable
retained earnings
revenue

Earning service revenue on account means cash

will be collected in the future, even though the related service has been performed

A deferral occurs when

-an expense is recognized after the associated cash has been paid
-revenue is recognized after the associated cash has been collected

Collecting an account receivable affects the

-balance sheet
-statement of cash flows

Issuing stock for cash increases

assets
stockholders' equity
common stock
cash flow from financing activities

Recognizing revenue on account will

cause an increase in the amount of net income shown on the income statement
not affect the statement of cash flows

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Cash payment for salary expense is a(n)

asset use transaction

accounts receivable is an

asset

When a company collects an account receivable

cash increases
revenue is not affected

When a company recognizes revenue on account, the balance in the

accounts receivable account increases and balance in the revenue account increases

The cash payment of salary expense

-is a cash outflow from operating activities
-decreases Retained Earnings by the payment amount

Recognizing a cash expense will

-cause the amount of assets shown on the balance sheet to decrease
-cause a decrease in the net cash flow from operations shown on the statement of cash flows

Earning service revenue on account means cash

will be collected in the future, even though the related service has been performed

Signing a contract to provide future services

has no effect on financial statements

When a company incurs a cash expense, the balance in the cash account

decreases and the balance in the expense account increases

An account receivable is an expectation to ______ in the future

collect cash

When a company collects cash from an account receivable, cash

increases and accounts receivable decreases

Westchester Company signed a legally binding contract to provide $3,000 of services to be performed in the future. Signing the agreement

-did not affect cash flow
-did not affect retained earnings

Recognizing revenue on account affects the

statement of changes in stockholders equity
balance sheet
income statement

When an employee works in Year 1 but is paid in Year 2,

both an expense and liability are recorded in Year 1
there is no income statement affect in Year 2
there is no cash flow affect in Year 1

The entry to recognize accrued salary expense is called a(n)

adjusting

Salaries payable represents an ______ in the future

obligation to pay employees cash

Recognizing accrued expense is a(n) ______ transaction.

claims exchange

Accrued salary expense occurs when an employee

works in Year 1, but is paid in Year 2

Acquiring cash by issuing common stock

increases cash
increases common stock

Adjusting journal entries

only update accounting records

An obligation to pay cash to employees in the future is normally called salaries

payable

Which of the following are reported on the income statement?

Net income
Salary expense

When an employee works in Year 1 but is paid in Year 2, the company must recognize an expense in Year(s)

1 only

When a company recognizes an accrued salary expense,

expenses increase
cash is not affected
salaries payable increases

Which of the following are reported on the income statement?

Advertising expense
Consulting revenue

The total benefits, both cash and other items, received from operating the business are shown on the

income statement

Recognizing a cash expense for advertising will

cause the amount of assets shown on the balance sheet to decrease
cause a decrease in the net cash flow from operations shown on the statement of cash flows

The statement of changes in stockholders' equity reports

earning income
issuing common stock
paying dividends

Which of the following are found on the statement of changes in stockholders' equity?

Dividends
Beginning retained earnings

Net income and cash flow from operating activities will

differ due to accrual accounting used on the income statement

An entity's assets, liabilities and stockholders' equity are disclosed on the

balance sheet

Issuing stock in exchange for cash will

increase stockholders' equity
be reported on the statement of cash flows

Which of the following are found on the statement of changes in stockholders' equity?

common stock
net income

Green Company incurred $5,000 of accrued expenses during Year 1, but paid the cash associated with the payables in Year 2. Based on this information alone, under accrual accounting, the company would report a net loss of ______.

$5,000 and cash outflow from operations of zero in Year 1
zero and cash outflow from operations of $5,000 in Year 2

Which of the following accounts is closed at the end of the accounting cycle?

salary expense

The change in cash is explained by the

statement of cash flows

A change in stockholders' equity is caused by

incurring a cash expense
earnings
issuing stock

Which of the following describes the matching concept?

Expenses should be matched with the revenue they produce.

Adjusting entries are normally prepared

at the end of an accounting period before financial statements are prepared

Costs that cannot be matched with revenue and are expensed in the period in which they are paid are called

period costs