Accounting Online Program Accounting Basics 3

Question 1

Under accrual accounting, when is revenue recognized?

Accepted Answer

When earned, regardless of when cash is received

Answer

Accrual accounting recognizes revenue when it is earned and realizable, not necessarily when cash changes hands.

Question 2

Which of the following is an example of a contra asset account?

Accepted Answer

Accumulated Depreciation

Answer

Accumulated Depreciation offsets the related asset account (e.g., Equipment) and carries a normal credit balance.

Question 3

If a company has total assets of $80,000 and total liabilities of $30,000, what is owner's equity?

Accepted Answer

$50,000

Answer

Owner's equity = Total Assets − Total Liabilities = $80,000 − $30,000 = $50,000.

Question 4

What type of account is 'Prepaid Insurance'?

Accepted Answer

Asset

Answer

Prepaid Insurance is a current asset representing insurance coverage paid for but not yet used.

Question 5

Which depreciation method allocates an equal amount of expense each period?

Accepted Answer

Straight-line

Answer

The straight-line method spreads the depreciable cost evenly over the asset's useful life.

Accounting Online Program Practice Test