Accrual & Prepayments

Question 1

What is adjusting entries

Answer 1

These are entries at the end of an accounting period to ensure correct expenses and revenues are recorded in correct time period

Question 2

What is the time period assumption

Answer 2

Assumes the economic life of a business s divided into artificial time periods

Question 3

What is the Revenue/Recognition Principle

Answer 3

Revenue is recognized in time period in which it is earned

Question 4

What is the Match Principle

Answer 4

Expenses should be recognized in time period which it is incurred

Question 5

What are the two Current Asset Adjusting entries

Answer 5

Prepaid expenses
Accrued Revenue

Question 6

State the Double entry for both of these

Answer 6

Prepaid Expense
DR: Expense
Cr: Prepaid Expense( Asset)

Accrued Revenue
DR: Accounts Rec (asset)
CR: Revenue

Question 7

What are the two Current liability adjusting entries

Answer 7

Unearned Revenue
Accrued Expense

Question 8

State the Double Entries

Answer 8

Accrued Expense
DR: Expense
Cr: Expense Payable (cl)

Unearned Revenues
DR: Unearned Rev
CR: Revenue