Ch. 3 Accounting – Flashcards
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the matching concept
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states that the revenues and related expenses should be reported in the same period
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Using accrual accounting, expenses are recorded and reported only
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when they are incurred, whether or not cash is paid
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Prior to the adjusting process, accrued revenue has
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been earned and not recorded as revenue
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Deferred expenses have
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not yet been recorded as expenses
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Deferred revenue is revenue that is
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not earned but the cash has been received
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Adjusting entries affect at least one
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income statement account and one balance sheet account
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Which one of the accounts below would likely be included in an accrual adjusting entry?
-insurance expense, prepaid rent, interest expense, unearned rent
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Interest Expense
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Which one of the following accounts below would likely be included in a deferral adjusting entry?
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Unearned Revenue
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The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is
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debit Rent Expense, $8,000; credit Prepaid Rent, $8,000
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As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called
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depreciation
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The entry to adjust the accounts for wages accrued at the end of the accounting period is
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debit Wages Expense; credit Wages Payable
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Data for an adjusting entry described as "accrued wages, $2,020" means to debit
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Wages Expense and credit Wages Payable
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Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the amount of supplies
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used
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Accrued expenses are ordinarily reported on the balance sheet as
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liabilities
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Which of the following pairs of accounts could not appear in the same adjusting entry?
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Interest Income and Interest Expense
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The unearned rent account has a balance of $72,000. If $18,000 of the $72,000 is unearned at the end of the accounting period, the amount of the adjusting entry is
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$54,000
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Which of the following is not true regarding depreciation?
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Depreciation expense reflects the decrease in market value each year.
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The balance in the supplies account, before adjustment at the end of the year is $6,250. The proper adjusting entry if the amount of supplies on hand at the end of the year is $1,500 would be
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debit Supplies Expense $4,750, credit Supplies $4,750
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At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?
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Salary Expense for the year was understated.
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Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the trial balance?
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Depreciation Expense
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All of the following statements regarding vertical analysis are true except:
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In a vertical analysis of an income statement, each item is stated as a percent of total expenses.
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For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income?
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Net income is overstated by $2,300.
