chap 3 quiz

adjustment process at the end of the accounting period

1) using there unadjusted trial balance, determine the accounts requiring adjustment 2) record the adjusting entries in the journal 3) post the adjusting journal entries to the t-accounts 4) prepare an adjusted trial balance to check the equality of the debits and credits

Under the accrual basis of accounting, the ___ principle requires that expenses be recognized in the same period as the related revenues

matching

transactions that do not require adjusting entries

ones that result in revenues or expenses being recorded at the same time as the cash flow; transactions that do not involve revenue or expense activities

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

prepaid expenses; assets

the sum of current and long-term assets reported on the balance sheet is referred to as

total assets

In an accrual adjustment for expenses incurred but not yet paid ____

a liability is increasing since cash will be paid in the future

Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate these revenues is referred to as ___-basis accounting

accrual

____-basis accounting helps measure and report revenues and expenses in a way that clearly reflects the ability of a company to create value for its stockholders

accrual

Revenue in the income statement for the year ended December 31, 2018 equals the ___

amount earned by selling goods or services to customers during 2018

a classified balance sheet shows subtotals for current ___ and current ___

assets; liabilities

Reporting revenues only when cash is received and expenses only when cash is paid is called the ___ basis of accounting

cash

the entries needed for the closing process

credit dividends declared and debit retained earnings; debit each revenue, credit each expense, and record the difference in retained earnings

on a classified balance sheet, total liabilities represent the sum of ___ and long-term ___.

current; liabilities

entries needed for the closing process

debit each revenue, credit each expense, and record the difference in retained earnings; credit dividends declared and debit retained earnings

An adjusting entry for accrued expenses involves a:

debit to an expense; credit to a liability

The post-closing trial balance checks that total ___ equal total ___ at the end of the period

debits; credits

supplies should be ___ and supplies expense should be ___ for supplies used up during the period

decreased; increased

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

depreciation

current liabilities are

due within the next year

credit

expenses

adjusting entries are posted to ___ ___ accounts to update their balances

general ledger

revenues and expenses are reported in the

income statement

___ is defined as the "cost of borrowing money." Since the account represents all the cost incurred during the period on borrowed money, it is classified as a(n) ___ account.

interest; expense

deferred revenue is a(n)

liability

What are current assets?

provide benefits within the next year

expenses incurred, not yet paid; goods and services provided, not yet collected

referred to as "accruals"

debit

retained earnings

according to the ___ ___ principle, revenues should be recognized when goods or services are provided to customers, not necessarily when cash is received.

revenue recognition

What appears in an income statement?

salaries expense; sales revenue

do not require adjusting entries

transactions that do not involve revenue or expense activities; transactions that result in revenues or expenses being recorded at the same time as the cash flow