Ch18

Question 1

Accrual Accounting

Answer 1

determining profit whereby revenue earned less expenses incurred

Question 2

Balance day adjustments

Answer 2

adjustments made to revenue and expenses account at end of period so they equal revenue earned with expenses incurred

Question 3

Adjusting entry

Answer 3

General journal entry used to adjust revenue and expense accounts

Question 4

Closing entry

Answer 4

Used to close off revenue and expense accounts

Question 5

Prepaid Expenses

Answer 5

Expenses paid during a period but not yet used - Current Asset

Question 6

Accrued Expenses

Answer 6

Expenses that have been incurred during a period but not yet paid - Current liability

Question 7

General Journal for the payment of a prepaid expense

Answer 7

Prepaid … Expense - Debit
GST clearing - Debit
Cash at Bank - Credit

Question 8

adjusting entry required on balance day - prepaid

Answer 8

General journal
… expense - debit
prepaid … expense - credit

P&L Summary - Credit
… expense - Debit

Question 9

Prepaid expenses general ledger

Answer 9

Prepaid … expense
Cash at bank - debit
… expense - credit
Balance - credit

…. expense
Prepaid … expense - debit
P&L Summary - credit

Question 10

adjusting entry required on balance day - accrued expenses

Answer 10

General journal
… expense - debit
accrued … expense - credit

P&L Summary - Credit
… expense - Debit

Question 11

The general ledger and accrued expenses

Answer 11

… expenses
Cash at Bank - debit
Accrued … expense - debit
P&L Summary - credit

Accrued … expense
… expense - credit

Question 12

Payment of an accrued expense in the next period

Answer 12

General journal
Accrued cleaning expenses - debit
Cleaning expenses - debit 
GST Clearing - debit
Cash at bank - Credit