FAR-F1-M8-Adjusting Journal Entries

Question 1

Is the following statement true or false? Advances affect cash flow but do not affect accrual basis expenses.

Answer 1

True

Question 2

What is the adjusting journal entry for deferred revenue?

Answer 2

Deferred revenue aka unearned revenue
Dr. Cash XXX
Cr. Unearned Revenue (liability) (XXX)

Correcting Journal Entry
Dr. Unearned Revenue XXX
Cr. Revenue (XXX)

Question 3

What is the adjusting journal entry for deferred expenses?

Answer 3

Deferred expenses aka Prepaid Expenses
Dr. Prepaid Expense (Asset) XXX
Cr. Cash (XXX)

Correcting Journal Entry
Dr. Expense Account XXX
Cr. Prepaid Expense (XXX)

Question 4

What is the adjusting journal entry for accrued revenue?

Answer 4

Accrued revenue aka Accounts Receivable
Dr. Accounts Receivable XXX
Cr. Revenue (XXX)

Correcting Entry
Dr. Cash XXX
Cr. Accounts Receivable (XXX)

Question 5

What is the adjusting journal entry for accrued expenses?

Answer 5

Accrued expenses aka Accrued liabilities
Dr. Interest Expense XXX
Cr. Interest Payable (XXX)

Correcting Entry
Dr. Interest Payable XXX
Cr. Cash (XXX)