Chapter 4 LearnSmart

the adjusting entry to record amortization causes

- assets to decrese - SE to decresase

which may require an accrual adjusting that's recorded with a debit to an expense and a credit to a liability

- interest owed on notes payable - utlilties to be paid at a later date

if a companys adjusted income is 10000 and income tax is usually 20% then what is the net incom

8000

the adjusting entry to record depreciation includes a debit to_____ and credit to ________

Depreciation Expense ----------- Accumulated Depreciation

(TRUE OR FALSE) retained earnings is involved in the closing process it is considered as a temporary account

FALSE

(TRUE OR FALSE) revenues, expenses, and dividends are considered temporary accounts

TRUE

interest payable is

a liability on the balance sheet and exspresses how much is owed

why is the balance in the depreciation expense account generally differerent form the balance of accumulated expense account

accumulated contains depreciation since the asset was purchased. depreciation only reflects the current

Closing entries are recorded

after financial statements have been prepared

the expense recognition principle requires

an adjustment for income tax expenses owed attribute to the net income earned during that period

adjusting entries never affect the asset account is called

cash

deferral adjustments occurs when

cash has been exchanged in a prior transaction

deferred revenue is charged when

cash is collected in advance of the revenue

for companies that generate net income during the current year will cause a net _____entry to retiaied earnings

credit

a closing entry may include

credit to Wages Expense

Accumulated depreciation has a normal _______ account. this means that it will _______ total assets

credit, decrease

salaries and wages payable are

debited when the wages that are previously recorded are paid

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

decrease, increase

supplies should _____ and supplies expense should _____ during the peiod

decrease, increase

prepayment for items such as rent are recorded as assets and later recorded as

expense

since the account represents a cost incurred on borrowed money it is called an _________ account

expense

purpose of recoding an adjustment to wages and salaries is to record wages

inccurred but not yet paid

what type of adjusting entry to recorded last

income tax inferred

in an accrual adjustment for expenses incurred but not yet paid, a liability is

increased because cash will be paid in the future due to the expense incurred

the reason of recording an adjusted entry for salaries and wages is to record wages

incurred but not yet paid

what is true about post-closing trial balance

it is an internal report prepared as the last step of the accounting cycle

which line item is reported on both the income statement and statement of retained earnings

net income

net income is recorded in the retained earnings account when _____ and ______accounts are closed and trandferred into retained earnings

revenue, expense

the adjusting entry to record wages incurred but not yet recorded includes a credit to

wages payable

the adjusted trial balance

will be used to determine the asset and liability balances on the balance sheet

The cost of borrowing money is called

interest

what are the effect of adjusting when using the accounting equation (A=L+SE)

liabilities will decrease SE will increase

interest not yet paid should be recorded as an expense AND a _____

liability

Amortization is the concept that applies to the

expensing of long-term assets that lack physical substance over their useful lives

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

exspenses

adjusting entries endsure that

revenues recongnized and expenses inccured during the period are reflected on the income statement

When will Accounts Receivable be involved in an adjusting entry?FaF

REV is earned but not yet collected or recorded at the end of the period

where are reports made to the public

- statement of cash flows - balance sheet - income sheet - notes to financial statement - statement of retained earnings

the defferred T- account will show what??

- the amounts the seller has fulfilled that were collected in advance on the debit side - the normal ending balance on the credit side - amounts recived in advance that seller hasnt fulfilled of its obligations on the credit side

entries needed for the closing process

-Credit Dividends Declared and debit Retained Earnings - Debit each revenue, credit each expense, and record the difference in Retained Earnings.

accrual adjustments occurs when

cash has not been exchanged in prior transaction

the step of the accounting where entries are recorded to updated retained earnings where the accounts have a zero balance is called the

closing process

How do temporary accounts differ from permanent accounts

temp accounts are closed at the end of the accounting period

deferred revenue reports

the amount collected in advance for which the seller has not fulfilled its obligtions

the balance of retained earnings prior to the closing process equals

the balance at the end of the previous accounting period

the balance in retained earnings prior to the closing process equals

the balance at the end of the prvious accounting period

the equipment balance in companys ledger is equal to

the beginning balance

how does the adjustment of depreciation differ from other deferral adjustments

the depreciation adjustment uses a contra-account rather than reducing the assets directly

to calculate a copanys income tax obligation

the income tax (before tax) is mulitplied by companys taxt rate

purpose of making an adjusted trial balance

to make sure total debits still equal total credits

effects of the financial condition of the business from the adjustment for revenues from the seller fulfilling its obligations that haven't been yet collected

total assets will increase and SE will increase

After the adjustments have been completed, the adjusted balance in the Interest Expense account represents

total interest that has been paid during the period