2.2 Adjusting Entries

Question 0

Adjusting Entries (2)?

Answer 0

1) Deferred Revenues & Expenses: updates EXISTING account balances to reflect CURRENT accounting values

2) Accrued Revenues & Expenses:
Creates NEW account balances to show UNRECORDED asset/liability

Question 1

Adjusting Entry

Answer 1

Internal Transactions that update account balances accordance w/ accrual accounting before preparing financial statements.

• No cash in/out: accounts closed.
• Only internal transactions & no outside business

Question 2

Differed Revenues & Expenses happens when & recorded when?

Answer 2

Happens when there’s cash flow in past,

Need to record revenue/expense now.

Question 3

Accrued Revenues & Expenses happens when & recorded when?

Answer 3

Happens when cash flow in future, haven’t paid good/service yet. Record rev/exp now.

Question 4

Question when finding Deferred Expenses?

Answer 4

Any assets “used up” this period & should be expensed?0

Question 5

Deferred Expenses Accounts (3)

Answer 5

• Prepaid Assets (insurance, rent)
• Depreciation
• Amortization

Question 6

Deferred Expense Journal Entry?

Answer 6

Dr. Expense

Cr. Prepaid Asset

Question 7

Question when finding Deferred Revenue?

Answer 7

Any liabilities fulfilled by delivery of goods/services that should be recognized as revenue?

Question 8

Deferred Revenue Accounts (2)

Answer 8

• Unearned Revenue
• Deferred Revenue

Receive cash before delivering goods/services & earn revenue over time

Question 9

Deferred Revenue Journal Entry?

Answer 9

Dr. Unearned Revenue Liability (reduces obligation of good/service)
Cr. Revenue

Question 10

Straight Line Depreciation equation?

Answer 10

Depreciation Expense = original cost- salvage value/ useful life

Question 11

Salvage Value

Answer 11

Projected Value asset when done using it.

Question 12

Useful Life

Answer 12

periods spent using asset.

Question 13

Who chooses salvage value & useful life? & how?

Answer 13

Managers choose based on how long asset used (depreciation assumption)

Question 14

Question when finding accrued Expenses?

Answer 14

Have any expenses accumulated during period that’s not yet recorded?

Question 15

Accrued Expense Accounts (1)

Answer 15

Payable Liabilities: ex. Income Taxes Payable, Interest Payable, Salaries & Wages Payable

Question 16

Accrued Expense journal entry?

Answer 16

Dr. Expense

Cr. Payable Liability

Question 17

Question when finding Accrued Revenues?

Answer 17

Have any revenues accumulated during period that’s not been recorded?

Question 18

Accrued Revenue Accounts (1)

Answer 18

Receivable Assets: ex. Interest Receivable, Rent Receivable

Question 19

Accrued Revenue Journal Entry?

Answer 19

Dr. Receivable Asset

Cr. Revenue

Question 20

Depreciation & Amortization are (/4 choices)____ _____ & their goal?

Answer 20

Deferred Expenses.

Goal: allocate original cost of long-lived asset over its useful life

Question 21

Depreciation & Amortization matches?

Answer 21

Total cost of asset to revenue it generates over its period of use.

Question 22

D & P: tangible assets?

Answer 22

Physical assets that require depreciation

Question 23

D & A: Intangible Assets?

Answer 23

Abstract assets that require amortization

Question 24

Amortization?

Answer 24

Gradually write off/reduce initial cost asset.

Question 25

Depreciation deducted from & not from?

Answer 25

Deducted from (recorded in) a Contra Asset Account (XA) that’s called Accumulated Depreciation & not from Tangible Asset.

• Has credit balance
• subtracted from PP&E on balance sheet to get “Net Book Value”

Question 26

Contra Asset Account

Answer 26

Accounts that record accumulative depreciation of assets.

Question 27

Contra Asset Account debit/credit balance?

Answer 27

Has credit balance, but like expense (contra SE account) on asset side of equation.

Question 28

Contra?

Answer 28

Against, opposite

Question 29

Amortization often, but not always deducted directly from?

Answer 29

Intangible asset account

Question 30

Why don’t you put depreciation in regular asset account?

Answer 30

Want to show original cost asset that’s separated from depreciation value.