Accounting CH 4

What is the purpose of an adjusted trial balance

An adjusted trial balance is prepared to check that the accounting records are still in balance, after having posted all adjusting entries to the T-accounts

Which of the following amounts are shown on the adjusted trial balance and on the statement of retained earnings?

Beginning-of-year balance for Retained Earnings

If an asset account such as equipment has a normal debit balance, the associated contra account should have a normal __________ balance.

Credit

What is used to increase the balances of revenue accounts?

Credits

What is used to increase the account balance of the Dividends account?

Debits

What is used to increase the balances of expense accounts?

Debits

The adjusting entry to record the revenue earned by the seller fulfilling its obligation results in a ________ to the deferred revenue account

Decrease

Deferral adjustments affect the balance sheet by ______

Decreasing assets for amounts used in liabilities for amounts of services/goods delivered to customers

The adjusting entry to record depreciation, includes a debit to _____ _____ and a credit to _____ _____.

Depreciation expense Accumulated depreciation

The adjusting entry to company will record for the amount of wages incurred but not yet paid will cause which of the following?

Increase liabilities Decrease stockholders equity

Which of the following statements is correct regarding the adjustment 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

The ________ recognition principle requires that a portion of long lived assets be transferred to an expense account during the accounting. The asset is being used to generate revenues

Matching

Which of the following transactions constitutes an accrual adjustment involving a revenue account?

interest revenue on a note payable

On December 31, Year 1, Chaco made the required adjustment to adjust its accounts to accrue salaries and wages expense. How does this year-end adjustment impact the amounts reported on the company's financial statements?

it increases a liability it increases an expense

On September 1, Year 1, a tenant of Bloomington Company business paid its rent in advance for the months of October, November, and December. On December 31, Year 1, Bloomington made the required adjustment to adjust its accounts. How does this year-end adjustment impact the amounts reported on the company's financial statements?

it increases a revenue it decreases a liability

On December 31, Year 1, Chaco made the required adjustment to adjust its accounts for services that were performed on account during the last week of the month but have not yet been recorded. How does this year-end adjustment impact the amounts reported on the company's financial statements?

it increases an asset it increases a revenue

On September 1, Year 1, Hales Company paid its rent in advance for the months of October, November, and December. On December 31, Year 1, Hales made the required adjustment to adjust its accounts. How does this year-end adjustment impact the amounts reported on the company's financial statements?

it increases an expense it decreases an asset

Assume that a company has prepared and posted its closing entries. Which of the following statements is true?

All revenue accounts, expense accounts, and the dividends account will have zero balances.

Which two accounts are used to record the adjusting entry for the amortization of long-term assets that lack physical substance?

Amortization expense Accumulated amortization

How do adjustments affect financial results?

1. All revenues and expenses will be reported in the period in which they are generated and incurred 2. The financial statements will present the best picture of whether the company's business activities were profitable that period and what economic resources the company owns and owes at the end of the period.

The entry to close service revenue into retained earnings includes a _____

1. Credit to retained earnings 2. Debit to service revenue

Place the steps taken at the end of the accounting period to complete the financial statement preparation process in the correct order

1. Prepare the adjusting entries 2. Prepare an adjusted trial balance 3. Prepare the financial statements

Why are adjustments made to the accounting records at the end of the period?

1. To ensure assets and liabilities are reported at appropriate amounts 2. To ensure the related revenues and expenses are reported in the proper period.

Accrual adjustments are needed when the business:

1. pays cash after the expense has been incurred 2. receives cash after the revenue has been generated

Deferral adjustments are needed when the business:

1. pays cash before the expense has been incurred 2. receives cash before the revenue has been generated

Which of the following statements about the Accumulated Depreciation account are true?

1. the contra account is subtracted when determining total assets on the balance sheet 2. it is a balance sheet account 3. its balance increases each year

Interest expense is...

Accrued each period the notes payable is unpaid

In accrual accounting to defer means to ________recording the other side of the cash transaction as a revenue or expense. Instead the other side of the cash entry is recorded as liability or prepaid

Postpone

Which of the following types of accounts are found in closing journal entries?

Revenue accounts, expense accounts, the Dividends account, and the Retained Earnings account.

What will be the effect on the accounts when the salaries and wages that were incurred and recorded in the prior accounting period are finally paid?

Salaries and wages payable will decrease and cash will decrease

Which of the following is the source of the Retained Earnings amount that is shown on the balance sheet?

Statement of retained earnings

Closing entries move the balances from the ________ accounts into the retained earnings account

Temporary

Deferred revenue should be reduced in revenue increased for the amount of revenue _____ during the period

The seller performs of its obligation

What is the purpose of preparing an adjusted trial balance?

To ensure that total debits equal total credits after the adjustments have been recorded

What are the effects on the accounting equation from the adjustment for which the seller has satisfied the performance obligation to its buyers during the accounting period that had previously been recorded as a liability?

Total liabilities will decrease and total stockholders equity will increase

What is the best place to begin to identify accounts that need adjustments?

Unadjusted trial balance