acctg-201 chapter 3

Adjusting entries: (Select all that apply.)

- are needed before financial statement preparation. - update the accounts to their proper balances.

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following?

- debit to Deferred Revenue - credit to Revenue

The two major categories reported in the income statement are:

- expense - revenue

___ is an allocation of the cost of buildings, vehicles, and equipment over time as they are used. (Enter one word per blank.)

Deprecation

___ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period. (Enter only one word.)

Deferred, Unearned, or Deffered

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased.

How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period.

___ is the amount earned from selling goods or services to customers. (Enter one word per blank.)

Revenue, Sales, or Revenues

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

Service revenue for $1,800

Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings?

Statement of stockholders' equity

Which of the following statements is true?

The income statement reports the financial position of a company at a point in time.

At the beginning of the accounting period, the balances of temporary accounts

are zero

Prepaid insurance is a(n) ___.

asset in the balance sheet

A classified balance sheet shows subtotals for current ___ and current ___. (Enter one word per blank.)

blank 1: assets or asset blank 2: liabilities or liability

The post-closing trial balance checks that total ___ equal total ___ at the end of the period. (Enter only one word per blank.)

blank 1: debits, total debits, debit, temporary, or dr blank 2: credits, total credits, credit, zero, or cr

Reporting revenues only when cash is received and expenses only when cash is paid is called the ___ basis of accounting. (Enter one word per blank.)

cash

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as

closing entries

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ___ in the asset account and a(n) ___ in the expense account.

decrease; increase

Supplies should be ___ and Supplies Expense should be ___ for the cost of supplies used up during the period.

decreased; increased

The process of allocating the cost of an asset to expense over the useful life of the asset is called

depreciation.

A classified balance sheet ___.

groups asset and liabilities into current and long-term categories

Consistent with accrual-basis accounting, expenses should be recognized

in the period when the related revenue is generated

Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses:

in the same period as related revenue.

Revenues and expenses are reported in the:

income statment

Deferred revenue is a(n) ___.

liability

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through

recording of adjusting entries

Which of the following financial statements typically is prepared last?

statement of cash flows

Closing entries move the balances from the ___ accounts into the Retained Earnings account.

temporary

Match the accounts with the correct terms.

temporary - revenues, expenses, dividends permanent - assets, liabilities, equity

The information reported in the statement of cash flows is organized by these activities:

- financing - investing - operating

The statement of stockholders' equity includes these amounts: (Select all that apply.)

- net income - dividends for the period - ending balance retained earnings

Which of the following statements regarding the statement of cash flows are correct?

- reports cash receipts - reports cash disbursements - the final financial statement that is typically prepared

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by ___ entries.

adjusting, adjusted, adjust, or adjustment

Revenue in the income statement for the year ended on December 31, 2021 equals the:

amount earned by selling goods or services to customers during 2021.

Adjusting entries are made at the ___ of the accounting period, while daily transactions are made throughout the accounting period. (Enter one word per blank.)

end, closing, close, or ending

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when:

paid