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Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? (Select all that apply.)

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

Which of the following statements describes the effect that adjusting entries may have on liabilities?

Adjusting entries increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.

What are the effects on the accounting equation when an adjusting entry is made for goods or services provided during the accounting period related to an amount previously received in advance from a customer?

Total liabilities will decrease and total stockholders' equity will increase.

The adjusting entry for an accrued revenue always includes: (Select all that apply.)

a credit to a revenue account a debit to an asset account

-basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company. (Enter only one word.)

accrual

Adjusting entries: (Select all that apply.)

are needed before financial statement preparation. update the accounts to their proper balances.

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

asset

The adjusting entry to record the supplies used during the period will result in a(n) ______.

decrease to Supplies and an increase to Supplies Expense

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account.

decrease,increase

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

decreased

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

depreciation

Munster Inc. debits Deferred Revenue and credits Service Revenue. As a result of this adjusting entry, Munster's: (Select all that apply.)

equity will increase liabilities will decrease

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n)

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. (Only one word per blank)

expense

The two major categories reported in the income statement are:

expense revenue

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

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

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

True or false: Salaries Receivable is the account used to record salaries owed to employees for work performed during the current period.

false

is defined as the "cost of borrowing money." (Enter one word per blank)

interest

Deferred revenue is a(n) ______.

liability

If an adjusting entry's debit is to an expense account, then the credit must be to which of the following? (Select all that apply.)

prepaid expense liability