ACC Pre-Chapter 3

________ occur when the cash flow occurs after either the expense is incurred or the revenue is earned.

Accruals

During December, Mainzel Interior Design Corporation redecorated the reception areas of a local hotel. The project was completed on Dec 31 with payment due in 30 days. Payment was received on Jan 21 of the following year. When should Mainzel recognize the related revenue using accrual accounting? (A) Dec 31 (B) Jan 31 (C) Jan 21

Dec 31

How do accrual adjustments affect liabilities and expenses?

Increases liabilities and expenses

True or False: each adjusting entry is posted to the general ledger.

True

An adjusting entry for accrued expenses involves:

credit to a liability, debit to an expense

The post-closing trial balance checks that total ______ equal total _______ at the end of the period.

debits ; credits

Adjustments help to ensure that all _______ are recorded in the period in which they are incurred.

expenses

Adjusting entries are posted to ___________ _______________ accounts to update their balances.

general ledger

__________ is defined as the "cost of borrowing money."

interest

With respect to current assets, _________ refers to how quickly an asset can be converted to cash

liquidity

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through

posting of adjusting entries