chapter 4 accounting

Which statements are true in regard to the five questions of transaction analysis methodology?

"Does the balance sheet balance?" is essentially the same question as "Do the debits equal the credits?" "What accounts are affected?" is where you identify the specific accounts affected by the transaction. "Does my analysis make sense?" is a feedback loop to ensure that the entry you recorded is consistent with your understanding of "What's going on?"

Identify the statements that are correct about reclassification year-end adjustments.

A reclassification year-end adjustment is required when cash for a revenue has been received but the revenue has not been recognized yet. A reclassification year-end adjustment is required when cash has been paid for an expense but the expense has not been incurred yet.

Which entry can be recorded as an accrual adjusting entry?

Dr. Interest Receivable 200 Cr. Interest Income 200 Reason: Dr. Interest Receivable 200 Cr. Interest Income 200 Period-end adjustments affect both the balance sheet and the income statement. Cash is never involved in an adjusting entry.

Which entry can be recorded as a reclassification adjusting entry?

Dr. Supplies 300 Cr. Supplies Expense 300

Which entry can be recorded as an accrual adjusting entry? Multiple choice question. Dr. Wages Payable 100 Cr. Accounts Payable 100 Dr. Wages Expense 100 Cr. Cash 100 Dr. Wages Payable 100 Cr. Cash 100 Dr. Wages Expense 100 Cr. Wages Payable 100

Dr. Wages Expense 100 Cr. Wages Payable 100

Under accrual accounting, what circumstances would likely prompt a year-end adjustment?

Employees worked during December but were not paid until early January.

On which side of a balance sheet would these normal account balances be posted?

Expenses on the debit side and revenues on the credit side

Which of these statements accurately describe a chart of accounts?

It serves as an index to a company's ledger. It is usually sequenced with assets listed first, followed by liabilities, stockholders' equity, revenues, and expenses.

Which statements are true of liability accounts?

They decrease with debit entries. They normally have a credit balance. They increase with credit entries.

Under accrual accounting, year-end adjustments are made for what reasons?

To ensure that all expenses are reported in the year in which they occurred To account for over- and under-recorded transactions at the end of the year

A(n) 1Blank 1 reclassification , Incorrect Unavailable (accrual/reclassification) period-end adjustment is required when an expense has been incurred but not yet paid in cash.

accrual

Period-end adjustment entries: Multiple select question. affect cash and at least one income statement account. can sometimes result in a debit to an asset account and a credit to a liability account, with no effect on the income statement. affect both the balance sheet and the income statement. result in recording expenses in the period during which they were incurred.

affect both the balance sheet and the income statement. result in recording expenses in the period during which they were incurred.

Normal account balances Blank______.

are on the debit side for assets and on the credit side for liability and stockholders' equity accounts

When a firm earns revenue prior to the end of the current fiscal period but has not yet received the associated revenue, there occurs a Blank______.

cash lag

When a firm receives cash prior to the end of the current fiscal period but has not yet earned all the associated revenue, there occurs a

cash lead

When a firm receives cash prior to the end of the current fiscal period but has not yet earned all the associated revenue, there occurs a Blank______.

cash lead

credit entries:

decrease asset accounts and increase liability and stockholders' equity accounts. decrease expense accounts and increase revenue accounts

In period-end adjustment entries,

either the debit or the credit affects the income statement

Debit entries Blank______.

increase expense accounts and decrease revenue accounts

Transactions are:

initially recorded in a journal and then posted to a ledger.

The report format of the balance sheet

presents assets above liabilities and stockholders' equity items.

The account format of the balance sheet:

presents assets on the left and liabilities and stockholders' equity items on the right.

transactions

provide the raw data that ends up being analyzed in financial statements are summarized in accounts, and accounts are further summarized in financial statements

A(n) (accrual/reclassification) period-end adjustment is required when the cash related to a revenue has been received but the revenue has not yet been earned.

reclassification

A(n)1Blank 1 accrual , Incorrect Unavailable (accrual/reclassification) period-end adjustment is required when cash has been paid for an expense but the expense has not yet been incurred.

reclassification

If debits equal credits, then:

the company's balance sheet equation will be in balance.

Normal account balances

the side on which an increase is recorded. The contra account has the opposite normal balance of its related account.