Chapter 4 HW Flashcards
A revenue not yet recognized; collected in advance.
Unearned Revenue
An expense incurred; not yet paid or recorded.
Accrued Expenses
A revenue recognized; not yet collected or recorded.
Accrued Revenues
An expense not yet incurred; paid in advance.
Prepaid Expenses
What is the periodicity assumption?
The economic life of a business can be divided into artificial time periods.
Which principle dictates that efforts (expenses) be matched with results (revenues)?
Expense recognition principle.
The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the
revenue recognition principle.
Which one of these statements about the accrual-basis of accounting is false?
Companies record events that change a company’s financial statements in the periods in which the events occur.
Companies recognize revenue in the period in which the performance obligation is satisfied.
This basis is in accord with generally accepted accounting principles.
Companies record revenue only when they receive cash, and record expense only when they pay out cash.
Companies record revenue only when they receive cash, and record expense only when they pay out cash.
In 2017, Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2018. If Costello uses the accrual-basis of accounting, then Costello will report
revenue of $10,000 in 2017.
Which of the following is not a type of adjusting entry?
Accrued expenses
Accrued revenues
Prepaid expenses
Earned revenues
Earned revenues
Adjusting entries are made to ensure that
expenses are recognized in the period in which they are incurred.
revenues are recorded in the period in which the performance obligation is satisfied.
balance sheet and income statement accounts have correct balances at the end of an accounting period.
all of these answer choices are correct.
Which of the following is not a typical example of a prepaid expense?
Entry field with incorrect answer
Wages
Insurance
Supplies
Rent
Wages
Cash received before services are performed are recorded as
liabilities
Adjustments for prepaid expenses
decrease assets and increase expenses.
Adjustments for unearned revenues
decrease liabilities and increase revenues.
A retailer sells prepaid gift cards under its own brand to customers, which are popular during the Holidays. If a company sells $200 worth of gift cards to a customer before Xmas but the same are not used to purchased goods until after the New Year’s, how should the retailer record this transaction?
Debit cash and credit Unearned Revenue.
Which of the following is not a typical example of an accrued expense?
Interest
Taxes
Depreciation
Wages
Depreciation
Adjustments for accrued revenues
increase assets and increase revenues.
On August 1, Luang Corporation signed a $30,000, 14%, 2-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be
Interest Expense $1,750
Interest Payable $1,750
30000 x 14/100 = 4200
4200 x 5/12 (August to December) = 1750
Financial statements can be prepared directly from the
adjusted trial balance.
how to calculate retained earnings
add net income and subtract dividends from beginning Retained Earnings
Which account will have a zero balance after a company has journalized and posted closing entries?
Service Revenue.
Which types of accounts will appear in the post-closing trial balance?
Permanent accounts.
The closing entry process consists of closing
all temporary accounts.
Which is the correct order of steps in the accounting cycle?
Journalize and post transactions, journalize and post adjusting entries, journalize and post closing entries.
Which statement is incorrect concerning the adjusted trial balance?
The adjusted trial balance lists the account balances in order of their magnitude.
An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made.
The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.
The adjusted trial balance provides the primary basis for the preparation of financial statements.
The adjusted trial balance lists the account balances in order of their magnitude.
