Accounting Ch. 3- Smartbook

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.

_______- basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company.

Accrual

Which of the following is (are) permitted under current U.S. GAAP?

Accrual-basis accounting

Identify 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.

When should supplies be recorded as an expense?

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

In January, Pizza Company bought pizza ingredients on account for $100, with payment due to the supplier in April. The pizza ingredients were used for pizzas made in January. In which month should Pizza Company record the cost of the pizza ingredients as an expense?

January

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

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

_____ are recorded in the period that goods and services are provided to customers and _____ are recorded in the period that costs are incurred while providing those goods and services.

Revenues; expenses

Under accrual-basis accounting, which of the following result in an expense being recorded in May?

The company pays cash in April for supplies used in May. The company pays cash in June for salaries earned in May.

Which of the following relationships is correct?

Total assets = total liabilities plus stockholders' equity

Which of the following statements most accurately describes the purposes of the closing entries?

To establish zero balances in the income statement and dividend accounts and to transfer net income and dividends into retained earnings

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

accrual-basis accounting.

The adjusted trial balance provides account balances reported in which financial statements? Multiple select question. -balance sheet -income statement -statement of stockholders' equity -financial statement notes

balance sheet income statement statement of stockholders' equity

The adjusted trial balance should be prepared ______ the financial statements are prepared in order to prove the ______ of the debits and credits.

before; equality

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

cash

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

closing entries

After the adjusting entries have been completed, the balance in the Rent Expense account represents the:

cost of rent for the accounting period

Andy records an adjusting entry for deferred revenue. Andy should:

credit a revenue account debit a liability account

A closing entry may include a ______.

credit to Wages Expense

A closing entry includes a ______.

debit to Sales Revenue

The closing entry for dividends involves a debit to Retained Earnings and a credit to Dividends Declared. The debit to Retained Earnings causes a(n) _______ in the balance of the account

decrease

Which of the following would be included (added or subtracted) in the calculation of retained earnings?

expenses dividends declared beginning balance retained earnings revenues

In the closing process, ______ are zeroed out by crediting each account and ______ are zeroed out by debiting each account.

expenses and dividends; revenues

True or false: The adjusted trial balance presents the ending balance of retained earnings.

false

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 cash-basis accounting,

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

The journal entry to close dividends _____ retained earnings.

reduces

The adjusted trial balance provides account balances reported in which financial statements?

statement of stockholders' equity balance sheet income statement