chapter 3 pre written assignment accounting

occur when the cash flow occurs after either the expense is incurred or the revenue is earned. (Enter only one word.)

Accruals

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

Adjusting entries for accrued expenses can increase liabilities and increase expenses.

Which of the following transactions would normally be recorded as an asset when cash is paid?

Rent paid in advance

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

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

The post-closing trial balance checks that total _________ equal total _______ at the end of the period.

debits and credits

Prepaid expenses should be Blank______ by the cost of the asset used during the accounting period.

decreased

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

decreased; increased

The statement of stockholders' equity includes these amounts:

dividends for the period, ending balance retained earnings, and net income

Adjusting entries help to ensure that all Blank______ are recorded in the period in which they are incurred.

expenses

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

recording of adjusting entries

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

temporary

There is a cause-and-effect relationship between revenues and expenses that dictates:

when costs are recognized as expenses in the income statement.

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31?

- A company pays for 4 months of advertising in the Wall Street Journal on November 1. - A company pays a 6-month insurance premium at the beginning of October.

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

- credit a revenue account - debit a liability account

An adjusting entry for accrued expenses involves: (Select all that apply.)

- debit to an expense - credit to a liability

A primary purpose of adjusting entries is to record events that

- have occurred but that have not yet been recorded

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

- investing - operating - financing

If an adjusting entry's debit is to an expense account, then the credit must be to which of the following?

- prepaid expense - liability

The two major categories reported in the income statement are:

- revenue - expense

Under cash-basis accounting, (Select all that apply.)

- revenues are recorded when cash is received - expenses are recorded when cash is paid.

The post-closing trial balance helps to verify that: (Select all that apply.)

- we prepared and posted closing entries correctly - the accounts are ready for next period's transactions

Which of the following would be referred to as "accruals?" (Select all that apply.)

-Expenses incurred, not yet paid -Goods and services provided, not yet collected

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

closing entries

Depreciation is an allocation of the __________ of buildings, vehicles, and equipment to expense over time as they are used

costs

____________ 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

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

depreciation.

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

paid

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

prepaid expenses; assets

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for ______ entries

Adjusting

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

- The final financial statement that is typically prepared - Reports cash disbursements - Reports cash receipts

True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

-false reasoning :Adjustments remove the value of assets that have been used up or expired during the period, leaving a balance that represents the economic benefit remaining in the account.

When should supplies be recorded as an expense?

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

Which of the following statements is true?

Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.

Which of the following pre-payments requires an adjusting entry at the end of the year?

On November 1, the company pays rent for the next six months.

How do temporary accounts differ from permanent accounts?

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

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 of the following financial statements typically is prepared last?

Statement of cash flows

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

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

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

In recording an accrual adjusting entry to account for revenues earned but not yet collected, Blank______.

an asset is increased since cash will be collected at a later date

A prepayment such as "Prepaid Insurance" is originally recorded as a(n) ___ when an insurance policy is purchased and will later be expenses in the period used.

asset

Adjusting entries ensure that Blank______ balances are reported at amounts representing the economic benefits that remain at the end of the period.

asset

Norbert Inc. delivered goods and services during December. Payment is expected during the first week of January. The related adjusting entry should consist of a debit to a(n) Blank______ account and a credit to a(n) Blank______ account.

asset; revenue

a classified balance sheet shows totals for current ___ and current ____

assets and liabilities

Prepaid rent appears in the Blank______.

balance sheet because it is an asset

If an adjusting entry's credit is to a liability account, then the debit must be to Blank______.

expense

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n) ______in the period the benefit expires.

expense

A classified balance sheet Blank______.

groups asset and liabilities into current and long-term categories

An adjusting entry is necessary to record interest expense at year-end because the interest:

has already been incurred

Revenues and expenses are reported in the:

income statement

The expense that relates to a formal note payable and accumulates or accrues throughout the accounting period is referred to as _________ expense

interest

Deferred revenue is a(n) Blank______.

liability

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts Blank______ at the end of the accounting period.

owed

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

revenue