Hello in this presentation we will take a look at multiple choice questions having to do with the adjusting process. First question, a principle requiring identifying the activities of a business with specific time periods is the AE operating cycle, B time period assumption, see revenue recognition principle, the matching principle IE accrual principle. If we go through these once again, the question of a principle requiring identifying the activities of a business with specific time periods is the A operating cycle. So, I don't think that's going to be it. We're not requiring the the identifying of activities of a business with a specific time operating cycle kind of talks about a time we're talking about a timeframe, but it's not going to be the operating cycle time period assumption. So that's going to assume that we have a time period that we're going to be applying to it sounds pretty good.

We're going to keep that Here, I'm going to go to the next one revenue recognition principle, that that's gonna tell us when we recognize revenue, basically when it is earned according to the revenue recognition principle, but it's not going to be identifying the activities of a business, it identifies the revenue. But that's actually not not going to be it. And then the next one is going to be the matching principle. And that also applies an accrual principle, this being related to the expenses, recognizing expenses, in accordance with the time period that they helped to generate revenue to match them up to the revenue, but that's not going to be it. And then the accrual basis, that's going to be these two principles here. And you might be able to, when you see a question like this, if revenue recognition sounded good or matching sounded good, and then you say, oh, they're both there, and they both might be good.

And then you see the accrual basis which again, covers both the revenue recognition and matching because they're all based In the same kind of wheelhouse, maybe we obviously can't pick all of them, so possibly none of them. That could be grounds to eliminate them. In other words, and we're going to be left in with the B time period assumption. So we're going to say B is the answer if we read this once again we have a principle of requiring identifying the activities of a business with specific time periods is the time period assumption principle. Next question, prepaid expenses, accumulated depreciation, accrued expenses and unearned revenues are examples of a items that require contra accounts, B, assets and equity accounts see items that require adjusting entries, D asset accounts and E income statement accounts. Once again the question of prepare prepaid expenses accumulated depreciation, accrued expenses and unearned revenues.

Examples of a items that require contra accounts. Now a contra account is an account that had that is contrary to the normal balance, the most common one that we run across would be accumulated depreciation because it's related to the equipment account or some type of property, plant and equipment. And it has a credit normal balance to bring it down to total equipment, but the others are not contrast. So it's actually not going to be a one of them has a contra account, but they hold on and then be assets and equity accounts. So if we go through there we can we can say prepaid expenses that looks like an asset, accumulated depreciation that's a contra asset to kind of asset accrued expenses. You could say it's going to be and not an asset, but a liability.

Unearned revenue also going to be a liability. So we're going to say assets and equity No. Items that require adjusting entries. That sounds like it could be If we go to D, we're going to say asset accounts. Again, we have some liabilities up there, so that doesn't look correct. And he says income statement accounts.

And I don't think any of them our income statement accounts that are listed here. Not that there wouldn't be income statement accounts in the adjusting process. But that's not it. So we're left with C here. Items that require adjusting entries. We've read through that one more time we're going to say prepaid expenses accumulated depreciation, accrued expenses and unearned revenues are examples of items that require adjusting entries.

Next question. And adjusting entry could be made for each except a prepaid expenses. B depreciation c unearned revenues, D owner investments, ie accrued expenses read into that one more time we can say an adjusting entry could be made for each except a prepaid expenses prepaid card fences are an item that we do have adjusting entries forwards one of our categories of expenses, the most common being prepaid insurance. So that is not going to be our answer because we do have an adjusting entry for it. B says depreciation, depreciation related to the depreciating of property plant and equipment is an adjusting entry and therefore, it will not be it. C says unearned revenues.

Unearned revenues is going to be revenue that were cash received that was not yet earned. And therefore, we do need to adjust it and therefore, it will have an adjustment and not be the answer here. Then we have the owner investment. And that doesn't say i don't know i don't recall an adjusting entry for owner investment. We'll skip that for now. And then the last one says accrued expenses.

Once again, that's going to be one of our categories of adjusting entries. And so it will mean adjusting entry we can cross that out, leaving us with the answer of owning An investment. Once again question an adjusting entry could be made for each except answer D owner investment. Next question. Preparing financial statements based on the principle of recognizing revenue when earned and matching expenses to revenue is a cash basis be the matching principle see the time period assumption, the revenue basis IE accrual basis. Question once again, preparing financial statements based on the principle of recognizing revenue when earned and matching expenses to rep match to revenues is.

So we're going to say a cash basis. That's going to be the opposite of what we're talking about because we're recognizing revenue when earned. So it's not going to be the cash basis besides the matching principle, and that it is going to include the matching principle Because we are matching expenses to the revenue, so we can leave that right now given that kind of sounds like it's part of it, see, says the time period assumption. And you can kind of see we have something to deal with timing, but it's actually not going to be that item because that deals with us being able to basically record things in chunks being typically months, quarters years. Next one revenue basis. So we do see revenue here.

So we might be saying maybe that has something to do with it. And then he says accrual basis. So accrual basis is our normal, you know, General generally accepted principle of recognizing revenue and expenses. So if we look at what we're left with our question, once again been preparing financial statements based on the principle of recognizing revenue when earned and matching expenses to revenues is if we look at our Left answers here we've got the matching principle, revenue basis and accrual basis. Now, I'm going to say that the accrual basis is really the overarching thing. And if we look at the matching basis, it only applies to half this, it applies to the expense side of this because it's one of our accrual principles, and the other is the revenue recognition principle.

So this isn't even really the right term. If it was revenue recognition principle, it would be given the other half of this recognizing revenue, but the term that that covers both halves would be the accrual basis. So answer and question is preparing financial statements based on the principle of recognizing revenue when earned and matching expenses to revenues, is he accrual basis