Accounting 220 Chapter 3

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

Accruals

When recording an adjustment for the cost of using equipment during the current accounting period, which two accounts are affected?

Accumulated Depreciation and Depreciation Expense

How do adjusting entries for accrued expenses affect liabilities and expenses?

Adjusting entries for accrued expenses can increase liabilities and increase expenses.

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.

Accumulated Depreciation has a normal ----- balance which indicates that it reduces total assets

Credit

On a classified balance sheet, total liabilities represent the sum of ------- and long-term liabilities.

Current

--------Expense should be recorded to recognize the cost of using long-lived assets, such as equipment, during the accounting period. .

Depreciation

True or false: Accumulated Depreciation is a contra-account to a long-lived asset account, such as Equipment. This means that it is added to and increases the balance of the long-lived asset in the balance sheet. .

False: Accumulated Depreciation is a contra-account to a long-lived asset account, such as Equipment. This means that it is added to and increases the balance of the long-lived asset in the balance sheet. True false question.

Which of the following would be referred to as "accruals?"

Goods and services provided, not yet collected and Expenses incurred, not yet paid

Which of the following situations matches a journal entry that debits Deferred Revenue and credits Service Revenue?

Goods or services, for which cash was collected in advance, were provided during the current period.

How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period.

Which activities are part of the operating cycle?

Selling goods and services Collecting cash from customers Paying cash to suppliers

What are the effects on the accounting equation from the adjustment for salaries incurred but not yet paid during the accounting period?

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

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

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

before; equality

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

debits, total

The adjusting entry for equipment depreciation includes a debit to--- and a credit to---.

depreciation expense; accumulated depreciation

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

depreciation.

Consistent with accrual-basis accounting, expenses should be recognized

in the period when the related revenue is generated

Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses:

in the same period as related revenue.

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts Blank______ at the end of the accounting period.

owed

After the adjusting entries have been completed, the ending balance in the Supplies account represents the cost of supplies Blank______.

remaining at the end of the accounting period

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

statement of stockholders' equity balance sheet income statement

True or false: The adjusting entry to record depreciation does not directly reduce the long-lived asset accounts, such as Equipment, so that the original cost of the asset remains unchanged.

true

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

There is a cause-and-effect relationship between revenues and expenses that dictates:

when costs are recognized as expenses in the income statement.