Using accrual accounting, expenses are recorded and reported only: |
When they are incurred whether or not cash is paid. |
Adjusting entries are made to ensure that: |
d. All of the above |
An adjusting entry affects: |
A balance sheet account and an income statement account. |
If a revenue has been consumed but a bill has not been received at the end of the accounting period, then: |
An adjusting entry should be made recognizing the expense. |
Accrued expenses are: |
Incurred but not yet paid or recorded. |
Accrued revenues are: |
Recognized but not yet received or recorded. |
Deferred expenses are: |
Paid and recorded in an asset account before they are used or consumed. |
Deferred revenues are: |
Received and recorded as liabilities before they are recognized. |
A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause: |
d. Revenues to be understated |
Unearned revenue is classified as a(n): |
d. Liability |
On July 1 the Fisher Shoe Store paid $18,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is: |
c. debit Rent Expense, $3,000; credit Prepaid Rent, $3,000 |
If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be: |
b. debit Unearned Service Revenue and credit Service Revenue |
If a company fails to make an adjusting entry to record supplies expense, then: |
b. expense will be understated |
If a company fails to adjust an Unearned Rent Revenue account for rent that has been earned, what effect will this have on that month's financial statements? |
c. Liabilities will be overstated and revenues will be understated. |
If a company fails to adjust for accrued expenses what effect will this have on that month's financial statements? |
b. Expenses will be understated and net income and stockholders' equity will be overstated. |
Green Realty Company received a check for $30,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $30,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31: |
a. debit Unearned Rent Revenue, $5,000; credit Rent Revenue, $5,000 |
Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: |
c. An understatement of expenses and an understatement of liabilities. |
An adjusted trial balance: |
b. Proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. |
The following accounts show balances on the adjusted trial balance. Which of these account balances will NOT appear the same on the balance sheet? |
a. Retained earnings |
The closing entry process consists of closing: |
All temporary (nominal) accounts |
A post-closing trial balance will show: |
Only balance sheet accounts |