Hello in this presentation we will take a look at multiple choice questions that have to do with the adjusting process. First question, the accounting principle that requires revenue to be recorded when earned is a matching principle, the accrual reporting principle, see time period assumption D revenue recognition principle e going concern principle once again question, the accounting principle that requires revenue to be recorded when earned is so the matching principle, possibly I'm going to skip that one accrual reporting principle. It's accrual reporting sounds pretty good. It's going to talk with a cruel time period assumption for the last one, we're gonna say that one probably doesn't really ring a bell to me, I'm going to cross that out now. Next one revenue recognition principle. It's got the word revenue in it and that's what we're looking at here.

So that's let's see, it seems like a good one. They even says going concern assumption that doesn't have anything to do with our what we're talking about here it looks like so I'm gonna cross that one out matching principle accrual reporting and revenue recognition principles, what we have now, question once again, the accounting principle that requires revenue to be recorded when earned. The matching principle is an accrual principle, but it's actually the expense side. So I'm going to cross that out a cruel reporting principle. That is kind of a general setting where we're going to say accrual principles include the matching principle and revenue recognition. So you could say, Hey, you know, this is a, this is an accrual thing here that won't when we recognize revenue, but the more proper answer would actually be the revenue recognition principle.

It's more specific, that's what the actual accrual principle are. So this is an accrual principle, but it's a more specific accrual principle related to when revenue should be recognized. Next question. Interim financial statements are reports a the cover less than one year be that are prepared before any adjustments see that show the assets liabilities and equity in one column, the where revenues are reported on the income statement when cash is earned. And a worthy adjustment process is used to assign revenue to the periods they are earned. That question once again, Interim financial statements are reports that covered less than one year that looks like a plausible answer where we've got less than a year B that are prepared before any adjustments.

And possibly if we're saying their interim, they're not quite done yet. I'll leave that for now. See that show that assets liabilities and equity in one column. And sounds kind of arbitrary. I don't think they're going to say that. It has to do with one column, just format In other words, rather than having two columns, D, where revenues are reported on the income statement when cash is received, so that's going to be a accrual principle.

It's an accrual principle but I'm not sure it applies to interim financial statements and not all financial statements that are on a cruel basis. So I'm going to say that probably is not a he we're going to say where the adjustment process is used to assign revenues to the period they are earned. Once again, we're looking at the adjustment process basically to apply the revenue recognition principle. And the revenue recognition principle is not specific to just the interim time period. So I'm gonna say that's probably not it. Once again, we have the question of interim financial statements are reports a, they cover less than one year and B that are prepared before any adjustments of these two?

I think a is going to be the one that we want to see here. So interim financial statements are reports a company Less than one year. Next question, adjusting entries a affect only income statement accounts be affect only balance sheet accounts see affect cash accounts. D affect both income statement and balance sheet accounts and II affect only equity accounts. Once again question of adjusting entries. A we're going to say affects only income statement accounts.

Don't think that's the case, the adjusting entries remember are happening at the end of the time period in order to make our financial statements correct as of that time period on an accrual basis, because we are dealing with timing differences, we typically will have one of each account balance sheet and the income statement. So we're going to say it's not just the income statement, be says affects only the balance sheet. Again, that's that's not it. And we probably think of the income statement accounts before the balance sheet possibly because we are dealing with timing differences. The income statement is the timing statement. So we're trying to decide when does revenue and expenses have a timing effect.

But as we do that, we also of course, need to record the other side, which is going to be a balance sheet account. C says affects cash affect cash accounts. Now the adjusting entries, actually the one account that is not affected in the adjusting entries is the cash account, which is very different from of course, normal journal entries where the cash account is affected all the time. Most of the time 75% we're going to say, D we say affect both income statement and balance sheet accounts. I'm going to say that's the one I'm going to say that's probably if we read he says affects only equity accounts. That's not going to be true either.

Even if we assume equity included in the entire income statement, because the income statements kind of part of equity. We're saying it still has balance sheet accounts. That's not true. So we're gonna say D best answer once again, question over adjusting entries D effects. Both income statement and balance sheet accounts