Chapter 3 ACG EC

groups asset and liabilities into current and long-term categories

A classified balance sheet ______.

assets; liabilities

A classified balance sheet shows subtotals for current___ and current___ . (Enter one word per blank)

End

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

Owed

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

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

Adjusting entries: (Select all that apply.) A) update the accounts to their proper balances. B) are required in cash-basis accounting only. C) are needed before financial statement preparation. D) are prepared at the beginning of the period.

the amount of the sales or services still owed to the customer.

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:

used during the accounting period

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies:

recording of adjusting entries

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

temporary

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

prepaid expenses; assets

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 _____.

cost

Depreciation is an allocation of the ____of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

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

How do temporary accounts differ from permanent accounts?

have occurred but that have not yet been recorded

a primary purpose of adjusting entries is to record events that

Depreciation

is an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

deferred

revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period. (Enter only one word.)

B) liability C) prepaid expense

If an adjusting entry's debit is to an expense account, then the credit must be to which of the following? Multiple select question. A) revenue B) liability C) prepaid expense D) cash expense

Temporary <-> revenues, expenses, dividends Permanent <-> assets, liabilities, equity

Match Accounts with the correct terms.

Service revenue for $1,800

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

asset in the balance sheet

Prepaid insurance is a(n) ______.

income statement

Revenues and expenses are reported in the:

decreased; increased

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

accrual-basis accounting

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

closing entries

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

interest

The expense that relates to a formal note payable and accumulates or accrues throughout the accounting period is referred to as ___expense.

B) investing C) financing D) operating

The information reported in the statement of cash flows is organized by these activities: (Select all that apply.) A) accounting B) investing C) financing D) operating E) business

depreciation

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

C) ending balance retained earnings D) dividends for the period E) net income

The statement of stockholders' equity includes these amounts: (Select all that apply.) A) total revenues for the period B) cash C) ending balance retained earnings D) dividends for the period E) net income

B) net income C) ending balance retained earnings D) dividends for the period

The statement of stockholders' equity includes these amounts: (Select all that apply.) A) total revenues for the period B) net income C) ending balance retained earnings D) dividends for the period E) cash

C) debit to Deferred Revenue D) credit to Revenue

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following? A) credit to Deferred Revenue B) credit to Accounts Receivable C) debit to Deferred Revenue D) credit to Revenue E) debit to Cash F) credit to Cash

Statement of stockholders' equity

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?

Adjusting entries increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.

Which of the following statements describes the effect that adjusting entries may have on liabilities?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

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

Which of the following statements is true? A) The income statement reports the financial position of a company at a point in time. B) Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts. C) The balance sheet reports financial activities only for the current accounting period.

A) Reports cash disbursements D) Reports cash receipts E) The final financial statement that is typically prepared

Which of the following statements regarding the statement of cash flows are correct? (Select all that apply.) A) Reports cash disbursements B) It is an optional financial statement C) The financial statement that is typically prepared first D)Reports cash receipts E) The final financial statement that is typically prepared

accrual

____________-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.)

Statement of cash flows

Which of the following financial statements typically is prepared last?

C) credit to a liability D) debit to an expense

An adjusting entry for accrued expenses involves: (Select all that apply.) A) debit to an asset B) credit to an expense C) credit to a liability D) debit to an expense E) credit to a revenue F) debit to a liability

A) expense B) revenue

The two major categories reported in the income statement are: Multiple select question. A) expense B) revenue C) equity D) assets

adjusting

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