Adjusting and Closing Process

Question 1

Deferrals

Answer 1

Transactions for which cash has received or paid while the related revenue or expense has no been recorded

Question 2

Deferred expenses

Adjusting entry (prepaid expense)?

Answer 2

Company pays for an expense item in advance (prepaid insurance/rent, supplies)

Debit expenses and credit assets

Question 3

Deferred (unearned) Revenue

Adjusting entry (unearned revenue)?

Answer 3

Company receives cash in advance for services to be performed or goods to be delivered later

Debit liabilities and credit revenues

Question 4

Accruals

Answer 4

Transactions for which cash has NOT been received or paid but related revenue or expense has been earned or incurred and thus must be recorded

Question 5

Accrued Revenues

Adjusting entry?

Answer 5

Revenues earned but not yet received in cash or recorded

Debit assets and credit revenues

Question 6

Accrued Expenses

Adjusting entry?

Answer 6

Expenses incurred but not yet paid in cash or recorded

Debit expenses and credit liabilities