 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 A operating cycle, B time period assumption, C revenue recognition principle, D matching principle, C a cruel 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 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's going to 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 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 the 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, well, 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 basically in the same kind of wheelhouse. Maybe we obviously can't pick all of them. So possibly none of them, that could be a grounds to eliminate them in other words. And we're going to be left then with the be 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, C 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 are examples of A items that require contra accounts. Now contra account is an account that had that is contra 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 plans and equipment and it has a credit normal balance to bring it down the total equipment. But the others are not contra so it's actually not going to be A. One of them has a contra account but they all don't and then B assets and equity accounts. So if we go through there, we can say prepaid expenses that looks like an asset, accumulated depreciation that's a contra asset, a 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 it. 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 E says income statement accounts and I don't think any of them are 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 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. Last question, an adjusting entry could be made for each except A, prepaid expenses, B, depreciation, C, unearned revenues, D, owner investments, E, accrued expenses. Reading through that one more time we're going to say an adjusting entry could be made for each except A, prepaid expenses. Prepaid expenses are an item that we do have adjusting entries for. That's 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 plants 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 or 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, I don't recall an adjusting entry for owner investment. I'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 be an adjusting entry. We can cross that out leaving us with the answer of owner investment. Once again question and 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, B, the matching principle, C, the time period assumption, D, revenue basis, E, accrual basis. Question once again preparing financial statements based on the principle of recognizing revenues when earned and matching expenses 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 that's not going to be the cash basis. B says 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 because that kind of sounds like it's part of it. C says the time period assumption and you can kind of see whether 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 I mean who might be saying maybe that has something to do with it. And then E says accrual basis. So accrual basis is our normal generally accepted principle of recognizing revenue and expenses. So if we look at what we're left with, our question once again being preparing financial statements based on the principle of recognizing revenues 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 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 E accrual basis.