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Cash vs. Accrual

Quiz by Steve Howard

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22 questions
Show answers
  • Q1
    What is the primary principle of revenue recognition in accounting?
    Revenue is recognized when it is earned and realizable
    Revenue is recognized at the end of the year
    Revenue is recognized when an invoice is sent
    Revenue is recognized when cash is received
    30s
  • Q2
    What is the term used for the practice of recognizing revenue in the period in which it is earned, regardless of when cash is received?
    Deferral accounting
    Expense recognition
    Accrual accounting
    Cash accounting
    30s
  • Q3
    Which accounting standard provides guidelines for revenue recognition?
    Expense Recognition Principles
    Generally Accepted Accounting Principles (GAAP)
    International Financial Reporting Standards (IFRS)
    Cash Flow Statement (CFS)
    30s
  • Q4
    Which of the following is an example of recognizing revenue when it is earned?
    A contractor recognizes revenue when a bid is accepted
    A store recognizes revenue when a product is ordered
    A restaurant recognizes revenue when a meal is served to a customer
    A delivery service recognizes revenue when a shipment is picked up
    30s
  • Q5
    What is a key factor that differentiates earned revenue from unearned revenue?
    Earned revenue has been delivered or performed
    Unearned revenue is always collected in cash
    Earned revenue is recorded at the time of sale
    Unearned revenue cannot be returned
    30s
  • Q6
    In a long-term contract, when is revenue typically recognized?
    Only after full payment is received
    At the end of the contract
    As work is completed over the duration of the contract
    At the start of the contract
    30s
  • Q7
    Which of the following events typically triggers revenue recognition for a service-based business?
    When the service is scheduled
    When the customer pays in advance
    When the service is performed
    When the bill is sent to the customer
    30s
  • Q8
    What principle determines when a company can recognize revenue in its financial statements?
    Revenue Recognition Principle
    Matching Principle
    Cost Principle
    Expense Recognition Principle
    30s
  • Q9
    Which of the following scenarios would likely lead to recognizing revenue at the time of sale?
    A service is promised but not performed yet
    A contract is signed but no payment is made
    A product is delivered on credit
    A customer buys a product in-store and pays in cash
    30s
  • Q10
    What is the primary purpose of the Revenue Recognition Principle?
    To provide consistency and comparability in financial reporting
    To ensure all cash is collected before reporting
    To eliminate all expenses
    To increase the number of sales
    30s
  • Q11
    What does cash basis accounting recognize?
    Revenue when it is earned
    Both revenue and expenses when they are estimated
    Revenue when cash is received
    Expenses when they are incurred
    30s
  • Q12
    Which of the following is a limitation of cash basis accounting?
    It does not provide an accurate picture of long-term financial performance
    It does not allow for cash management
    It is too complex to understand
    It requires more frequent reporting
    30s
  • Q13
    Which types of businesses typically use cash basis accounting?
    Nonprofit organizations
    Large corporations
    Small businesses and sole proprietorships
    Government agencies
    30s
  • Q14
    What is one advantage of cash basis accounting?
    The ability to predict future revenues easily
    Simplicity in tracking cash flow
    Compliance with GAAP
    Accurate matching of revenue and expenses
    30s
  • Q15
    Under cash basis accounting, when are expenses recorded?
    When the service is provided
    When the invoice is received
    At the end of the accounting period
    When cash is paid
    30s

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