acc 3/4

Created by bwell700 

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unearned revenue is reported in the financial statement as:

liability on the balance sheet

interim financial statements refer to financial reports :

that cover less than 1 year, usually spanning 1, 3, 6 months

main purpose of adjusting entries is to

record internal transactions and events

matching principle

the broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses it the

cash basis accounting

the system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid

adjusting journals are made at the end of the accounting period for what reason ?

- update liability and asset accts to their proper balances
-assigning revenues to the periods in which they are earned
-assigning expenses to the periods in which they are incurred
-assuring that financial statements reflect the of revenues earned & expenses incurred

Accrual basis accounting

the approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenue

items the require adjusting entry :

prepaid expenses, depreciations , accrued expenses, unearned revenues, & accrued revenues

Accrual basis of accounting is:

generally accepted for external reporting b/c it is more useful for most of business decisions

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on Dec. 31. The oversight is?

overstate net income by $28,000

If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show?

Assets, Net Income, and Equity overstated

Adjusting entries:

affect both income statement and balance sheet accounts

The accrual basis of accounting :

is generally accepted for external reporting because it gives us more useful information

Contra Acct

an account linked with another acct that has an opposite normal balance and thats is subtracted from the balance of the related acct

Accrued Expenses

incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability

Depreciation

the periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets

If the accountant failed to make and adjusting entry at the end of the period to record depreciation for the period, the omission will cause::

understatement of expenses

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an acct called Unearned legal fees, the end of the period adjusting entry to record the portion of those fees that has been earned is:

Debit unearned legal fees and credit legal fees earned

On April 1,2007, a company paid the $1350 premium on a 3 year insurance policy with benefits beginning on that date. what will be the insurance expense on the annual income statement for the year ended Dec 31, 2007?

$337.50

A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On Dec 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year?

$175

Revenue Recognition Principle

accounting principle that requires revenue to be reported when earned

Accrued Expenses

incurred but unpaid expensed that are recorded during the adjusting process with a debit to an expense and a credit to liability

Which asset is not depreciated ?

land

the adjusting entry to record the earned but unpaid salaries of employees at the end of an acct period is?

Debit salaries expense and credit salaries payable

Throughout the accting period the fees for legal services paid in advance by clients are recoded in an acct called unearned legal dfees. if the acctant fails to make the end of period adjusting entry to record the portion of these fees that has been earned, will affect:

-overstatement of owners equity
-overstatement of liabilities

Book value

the difference between the cost of an asset and the accumulated depreciation for that asset

Adjusted trial Balance

trial balance prepared after adjustments have been recorded

Unadjusted trial balance

trial balance prepared before any adjustments have been recorded

Financial statements are prepared in the following order:

Income statement
statement of owners equity
balance sheet

nominal accounts

another name for temporary accts

When closing entries are made:

all temporary accounts are closed but not the permanent ones

Information on a worksheet is used to :

-prepare financial statements
-journalize adjusting entries
-journalize closing entries

Temporary accounts

revenues, expenses, and withdrawals accounts, which are closed at the end of each accting period

Closing temporary accounts at the end of a period ::

-serves to transfer the effects of these accts to the owners capital acct on the balance sheet
-prepare the withdrawals act for use in the next period
-gives the revenue and expense accts 0 balance
-causes owner's capital to reflect increases from revenues and decreases from expenses and withdrawals

closing entries are required :

if the temporary accts are to reflect increases from revenues and decreases from expenses and withdrawals

Accounting Cycle

the recurring steps performed each accting period, starting with analyze and recording transactions in the journal and continuing through the post-closing trial balance

Post Closing Trial Balance

usual final step in the accounting cycle

Classified Balance Sheet

organizes assets and liabilities into important subgroups

Usual order for the asset section of a classified balance sheet is:

Current Assets, Long Term assets, plant assets, intangible assets

Two common subgroups for liabilities on a classified balance sheet are:

current liabilities and long term liabilities

Unadjusted Trial balance columns of a companys worksheet show the balance in the office supplies acct as $750. the adjustment columns show that $425 of these supplis were used during the period. The amount shown as office supplies in the balance sheet clumns of worksheet is :

$325 debit

worksheet

10 column spreadsheet used to draft a companys unadjusted trial balance, adjusting journal entries, adjusted trial balance, and financial statements, and which is an optional tool in accounting process is:

post closing trial balance

a trial balance prepared after the adjusting and closing entries have been posted, and which is the final step in the accounting cycle

company shows a $600 balance in prepaid insurance in the unadjusted trial balance columns of the worksheet. the adjustments columns show expired insurance of $200. This adjusting entry results in:

$200 less in net income

Income summary Account

used to close the revenue and expense accounts

Pro Forma Statements

statements that show the effects of proposed transactions as if the transactions had already occurred

Special Acct used only in the closing process to temporarily chold the amounts of revenues and expenses before the net difference is added to or subtracted from owners capital acct is the :

Income summary acct

Permanent accounts

Assets, liabilities, and equity accounts are not closed

J. godfrey, Capital account has a credit balance of $17,000 before closing entries are made. if total revenues for the period were $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey, capital acct after all closing entries are made?

$8,000

asset section of classified balance sheet includes:

current assets , long term investments, plant and equipment, and intangible assets

Dina Keder withdrew a total of $35,000 from her business during the current year. The entry needed to close the withdrawals acct is :

Debit Dina keder, capital and credit dina Kede withdrawals for $35,000

closing entries

journal entries recorded at the end of each accounting period to prepare the revenue, expenses, and withdrawals accts for the upcoming yr and to update the owners capital acct for the events of the yr just finished

it is obvious that an error occured in the preparationg of and or posting of closing entries if:

all balance sheet accts have 0 balance

after preparing and posting the clsing entries to close revenues(and gaines) and expenses (and losses) into the income summary, the income summary account has a debit balance of $33,000. The entry to close the income summary acct will include :

a debit of $33,000 to owner capital

permanent accts are another name for nominal accts

False

A post closing trial balance should include only permanent accts

True

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