Chapter 3 smartbook
temporary account- permanent account-
1.revenues,expenses,dividends 2.assets,liabilities,equity
at year-end, companies that utilize accrual-based accounting systems complete the measurement process through
recording of adjusting entries
-accounts receivable is an asset -deferred revenue is a liability -supplies expense is an expense -salaries payable is a liability -depreciation expense is an expense -service revenue is a revenue
-assets reported in balance sheet -liabilities reported in balance sheet -expense reported in income statement -revenues reported in income statement
the adjusting entry for an accrued revenue always includes
a debit to an asset account, a credit to a revenue account
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
consistent with blank-basis of accounting, we record revenue when we provide goods and services to customers, and we record expenses in the period that costs are used to provide those goods and services.
accrual
reporting revenues when goods or services are provided and expenses in the period they are incurred to generate related revenues is referred to as blank-basis accounting
accrual
to complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by blank entries
adjusting
adjusting entries:
are needed before financial statement preparation, update the accounts to their proper balances
prepaid insurance is an
asset in the balance sheet
a classified balance sheet shows subtotals for current blank and current blank
assets, liabilities
the entries that transfer the balance of all temporary accounts to retained earnings are referred to as
closing entries
depreciation is an allocation of the blank of buildings,vehicles, and equipment to expenses over time as they are used
cost
andy records an adjusting entry for deferred revenue. andy should
credit a revenue account, debit a liability account
the post-closing trial balance checks that total blank equal total blank at the end of the period
debits, credits
during december, mainzel interior design corporation redecorated the reception areas of a local hotel. the project was completed n december 31 with payment due in 30 days. payment was received on january 21 of the following year. When should mainzel recognize the related revenue using accrual accounting
december 31
blank 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
deferred
the process of allocating the cost of an asset to expense over the useful life of the asset is called
depreciation
the statement of stockholders equity includes these amounts
dividends for the period, net income, ending balance retained earnings
adjusting entries are made at the blank of the accounting period, while daily transactions are made throughout the accounting period
end
if an adjusting entry's credit is to a liability account, then the debit must be to
expense
a classified balance sheet
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
deferred revenue is a
liability
if an adjusting entrys debit is to an expense account, then the credit must be to which of the following
liability, prepaid expense
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
the two major categories reported in the income statement are
revenue, expense
under cash-basis accounting
revenues are recorded when cash is received, expenses are recorded when cash is paid
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 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
after the adjusting entries have been completed the adjusted balance in the supplies expense account represents the cost of supplies
used during the accounting period
the post-closing trial balance helps to verify that
we prepared and posted closing entries correctly, the accounts are ready for next period's transactions
how do adjusting entries for accrued expenses affect liabilities and expenses
adjusting entries for accrued expenses can increase liabilities and increase expenses
a prepayment that is originally recorded as an asset will be
allocated to future accounting periods based on the cost of the asset used during the period
when should supplies be recorded as an expense
in the period the supplies are used, regardless of when they were purchased
revenues and expenses are reported in the
income statement
which of the following statements is true
income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts
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.
adam corporation uses the cash-basis accounting. adam corporation should record expenses when
paid
closing entires move the balances from the blank accounts into the retained earnings account
temporary