Ch3

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by_____entries

Adjusting

A classified balance sheet shows subtotals for current_______and current________

Blank 1: assets or asset Blank 2: liabilities or liability

Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period.

decreased; increased

Revenues and expenses are reported in the:

income statement

Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____.

prepaid expenses; assets

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

recording of adjusting entries

The two major categories reported in the income statement are:

revenue expense

Temporary - Permanent -

revenues, expenses, dividends assets, liabilities, equity

Closing entries move the balances from the ______ accounts into the Retained Earnings account.

temporary

The post-closing trial balance checks that total______equal total _______at the end of the period. (Enter only one word per blank.)

temporary ; zero

Adjusting entries: (Select all that apply.)

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

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

Reporting revenues only when cash is received and expenses only when cash is paid is called the_______basis of accounting. (Enter one word per blank.)

Cash

Adjusting entries are made at the______of the accounting period, while daily transactions are made throughout the accounting period. (Enter one word per blank.)

End

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

GAAP-basis accounting.

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased

Which of the following statements is true?

Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.

Which of the following financial statements typically is prepared last?

Statement of cash flows

Which of the following statements regarding the statement of cash flows are correct?

The final financial statement that is typically prepared Reports cash disbursements Reports cash receipts

______-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

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

accrual-basis accounting.

At the beginning of the accounting period, the balances of temporary accounts

are zero

Prepaid rent appears in the ______.

balance sheet because it is an asset

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as`

closing entries

The statement of stockholders' equity includes these amounts:

dividends for the period net income ending balance retained earnings

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

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

A classified balance sheet ______.

groups asset and liabilities into current and long-term categories

The information reported in the statement of cash flows is organized by these activities:

operating financing investing

The post-closing trial balance helps to verify that: (Select all that apply.)

we prepared and posted closing entries correctly the accounts are ready for next period's transactions

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