133.The accounting principle that requires revenue to be recorded when earned is the: A.Matching principle. B.Revenue recognition principle. C.Time period assumption. D.Accrual reporting principle. E.Going-concern assumption.

134.Adjusting entries: A.Affect only income statement accounts. B.Affect only balance sheet accounts. C.Affect both income statement and balance sheet accounts. D.Affect cash accounts. E.Affect only equity accounts.Answer: C 135.The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the: A.Recognition principle. B.Cost principle. C.Cash basis of accounting. D.Expense recognition (Matching) principle. E.Time period principle.

136.The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called: A.Accrual basis accounting. B.Operating cycle accounting. C.Cash basis accounting. D.Revenue recognition accounting. E.Current basis accounting.

137.The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: A.Cash basis accounting. B.The matching principle. C.The time period assumption. D.Accrual basis accounting. E.Revenue basis accounting.

138.Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of: A.Items that require contra accounts. B.Items that require adjusting entries. C.Asset and equity. D.Asset accounts. E.Income statement accounts.

139.A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would: A.Understate net income by $28,000. B.Overstate net income by $28,000. C.Have no effect on net income. D.Overstate assets by $28,000. E.Understate assets by $28,000.

140.If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show: A.Assets overstated and equity understated. B.Assets and equity both understated. C.Assets overstated, net income understated, and equity overstated. D.Assets, net income, and equity understated. E.Assets, net income, and equity overstated.

141.If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account, this omission would cause: A.An overstatement of net income. B.An overstatement of assets. C.An overstatement of liabilities. D.An overstatement of equity. E.An understatement of liabilities.

142.Profit margin is defined as: A.Revenues divided by net sales. B.Net sales divided by assets. C.Net income divided by net sales. D.Net income divided by assets. E.Net sales divided by net income.