ACG 2021 Learnsmart

Undistributed profits that have accumulated in the company over time are called

retained earnings

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

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

adjusting entries

1. are needed before financial statement preparation 2. update the accounts to their proper balances

In an adjusting entry for expenses incurred but not yet paid ______.

a liability is increasing since cash will be paid in the future due to the expense incurred

Stockholders' equity arises primarily from amounts invested by shareholders and amounts ______.

borrowed from investors

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

closing entries

adjusting entry for accrued expenses

debit expense, credit liability

Andy records an adjusting entry for deferred revenue. Andy should: (Select all that apply.)

debit liability, credit revenue

____________ represent a company's primary means of communicating information to external users.

financial statements

When should supplies be recorded as an expense?

in the period the supplies are used, regardless of when they are purchased

The primary functions of accounting are to:

measure a company's activities communicate info to decision makers

income statements

temp accounts

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

temporary

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:

the amount of the sales or services still owed to the customer

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

How do temporary accounts differ from permanent accounts?

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

The purpose of a statement of cash flows is to provide information about the

cash receipts and cash disbursements during a period.

The form of business organization where an entity is legally separate from its owners and issues shares of stock is a

corporation

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

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

depreciation

How do adjusting entries for accrued expenses affect liabilities and expenses?

increase liabilities and increase expenses

The statement of cash flows classifies items as

operating, investing, and financing.

The two sources of stockholders' equity are amounts ______.

paid in from shareholders earned by the corporation

balance sheet accounts

perm accounts

Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____.

prepaid expenses, assets

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows

Which of the following financial statements typically is prepared last?

statement of cash flows