Chpt. 3 Learnsmart Questions

paid

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when:

False

True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

Adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period.

asset

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

Adjusting entries:

accrual

Consistent with the __-basis of accounting, we record revenue when we provide goods and services to customers, and we record expenses in the period that costs are used to provide those goods and services.

accrual

Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate related revenues is referred to as

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

Under cash-basis accounting, (Select all that apply.) Multiple select question. expenses are recorded in the period related revenue is generated. expenses are recorded when cash is paid. revenues are recorded when goods or services are provided. revenues are recorded when cash is received.

A company pays for 4 months of advertising in the Wall Street Journal on November 1. A company pays a 6-month insurance premium at the beginning of October.

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? A company pays a utility bill for charges incurred in the previous month. Reason: This is an example of a daily transaction. There will be no need to adjust any of the accounts at the end of the period. A company pays a 6-month insurance premium at the beginning of October. A company records interest expense that has accrued, but will not be paid until next year. Reason: This is an example of an accrual transaction. No prepayment has been made. A company pays for 4 months of advertising in the Wall Street Journal on November 1.

Prepaid insurance is a(n) ______.

asset in the balance sheet

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n) __ in the period the benefit expires.

expense

A primary purpose of adjusting entries is to record events that

have occurred but that have not yet been recorded.

Goods and services provided, but not yet collected. Expenses Incurred, not yet paid.

Which of the following would be referred to as "accruals?" (Select all that apply.) Multiple select question. Cash paid prior to expenses being incurred Goods and services provided, not yet collected Cash collected prior to goods or services being provided Expenses incurred, not yet paid