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ACCT 1209 Lecture Notes - Lecture 9: Accrual, Deferred Income, Deferral

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School
Northeastern University
Department
Accounting
Course
ACCT 1209
Professor
O' Kelly( G)

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Document Summary

Acct 1209 - lecture 09 adjusting entries; deferred and accrued revenues and. The accounting cycle: start of the period, during the period. Record journal entries in the general journal. Post amounts to the general ledger: at the end of the period. Prepare a trial balance to determine if debits equal credits. Prepare a complete set of financial statements. Close revenues, gains, expenses and losses to retained earnings. Adjusting entry: always at the end of the period, always affects the income statement and the balance account. A trial balance is a spreadsheet that lists the names of the t-accounts in one column, with their ending debit or credit balances in the next two columns. Debit balances are indicated in the left column and credit balances are indicated in the right column. The two columns are totaled to provide a check on the equality of the debits and credits.

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Related Questions

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.
True
False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:
Assets = Liabilities + Equity
Assets = Liabilities – Equity
Assets = Liabilities + Revenues
Equity = Liabilities + Revenues
QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.
Accounting Standards
Ethics
Generally Accepted Accounting Principles
FASB
QUESTION 4

The _____ is a collection of all accounts within a company’saccounting system.
General Journal
Chart of Accounts
General Ledger
Balance Sheet
QUESTION 5

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a company’s assets, and _____ is theowner’s claim on a company’s assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.
True
False
QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.
Increase, decrease
Decrease, increase
Decrease, decrease
Increase, increase
QUESTION 8

During the accounting cycle, we analyze transactions toprepare statements.
True
False
QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).
$1,000 adjustment
$2,000 adjustment
$2,500 adjustment
$3,000 adjustment
QUESTION 10

During the accounting cycle, to complete step 7 youwould:
Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.
Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.
Prepare statements--Use adjusted trial balance to preparefinancial statements.
Close--Journalize and post entries to close temporaryaccounts.
QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:
Balance sheet, adjusted trial balance, income statement
Balance sheet, unadjusted trial balance, Statement of Owner’sEquity
Income statement, adjusted trial balance, Statement of Owner’sEquity
Balance sheet, Income statement, Statement of Owner’sEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):
Adjusted trial balance
Worksheet
Post-closing trial balance
Unadjusted trial balance
General ledger
QUESTION 13

The two goals for completing the closing process are:
To identify accounts for closing and record the closingentries
To journalize and post transactions
To post transactions and prepare post-closing trialbalance
To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiod’s revenues and expenses.
QUESTION 14

Fill in the Blank: The _____ describes a company’s financialposition – by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.
True
False

QUESTION 16

The Income Statement:
Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.
Summarize adjusted ledger accounts and amounts
Describes a company’s revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities
Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.
QUESTION 17

An internal control system consists of the policies andprocedures used to:
Protect assets and Ensure reliable accounting
Urge adherence to company policies and Promote efficientoperations
All of the above
None of the above.
QUESTION 18

The cost-benefit principle is the second limitation of_______.
Bank reconciliations
Petty cash controls
Voucher system of controls
Internal controls
QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:
$325 debit
$325 credit
$425 debit
$425 credit
QUESTION 20

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:
$200 decrease to net income
$200 increase to net income
$200 different between the debit and credit columns of theUnadjusted Trial Balance
An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

Reliable Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Reliable Repairs & Service

UNADJUSTED TRIAL BALANCE

April 30, 2016

ACCOUNT TITLE DEBIT CREDIT

1

Cash

10,350.00

2

Accounts Receivable

67,500.00

3

Supplies

16,200.00

4

Equipment

116,100.00

5

Accounts Payable

15,750.00

6

Unearned Fees

18,000.00

7

Karin Bickle, Capital

121,500.00

8

Karin Bickle, Drawing

13,500.00

9

Fees Earned

294,750.00

10

Wages Expense

94,500.00

11

Rent Expense

72,000.00

12

Utilities Expense

51,750.00

13

Miscellaneous Expense

8,100.00

14

Totals

450,000.00

450,000.00

For preparing the adjusting entries, the following data were assembled:

a. Fees earned but unbilled on April 30 were $9,850.
b. Supplies on hand on April 30 were $4,660.
c. Depreciation of equipment was estimated to be $6,470 for the year.
d. The balance in unearned fees represented the April 1 receipt in advance for services to be provided. During April, $15,000 of the services were provided.
e. Unpaid Wages accrued on April 30 were $5,200.
Required:
1. Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.
2. Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.
3. Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.
4. Determine the effect of the adjusting entries on Karin Bickle, Capital.

Chart of Accounts

CHART OF ACCOUNTS
Reliable Repairs & Service
General Ledger
ASSETS
11 Cash
12 Accounts Receivable
13 Supplies
16 Equipment
17 Accumulated Depreciation-Equipment
LIABILITIES
21 Accounts Payable
22 Wages Payable
23 Unearned Fees
EQUITY
31 Karin Bickle, Capital
32 Karin Bickle, Drawing
REVENUE
41 Fees Earned
EXPENSES
51 Wages Expense
52 Rent Expense
53 Supplies Expense
54 Depreciation Expense
56 Utilities Expense
59 Miscellaneous Expense

Journal

1. Journalize the adjusting entries necessary on April 30, 2016. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

Adjusting Entries

2

3

4

5

6

7

8

9

10

11

Final Questions

2. Determine the revenues, expenses, and net income of Reliable Service & Repairs before the adjusting entries.

Before Adjusting Entries

1

Revenues

2

Expenses

3

Net income

3. Determine the revenues, expenses, and net income of Reliable Service & Repairs after the adjusting entries.

After Adjusting Entries

1

Revenues

2

Expenses

3

Net income

4. Determine the effect of the adjusting entries on Karin Bickle, Capital.

The capital account by

The general ledger of the Karlin Company, aconsulting company, at January 1, 2013, contained the following account balances:

Account Title

Debits

Credits

Cash

30,000

Accounts receivable

15,000

Equipment

20,000

Accumulated depreciation

6,000

Salaries payable

9,000

Common stock

40,500

Retained earnings

9,500

Total

65,000

65,000


The following is a summary of the transactions for theyear:

a.

Sales of services, $100,000, of which $30,000was on credit.

b.

Collected on accounts receivable, $27,300.

c.

Issued shares of common stock in exchange for$10,000 in cash.

d.

Paid salaries, $50,000 (of which $9,000 wasfor salaries payable).

e.

Paid miscellaneous expenses, $24,000.

f.

Purchased equipment for $15,000 in cash.

g.

Paid $2,500 in cash dividends to shareholders.

1.

Accrued salaries at year-end amounted to$1,000.

2.

Depreciation for the year on the equipment is$2,000.

Required:

1.

Prepare a general journal entry for each ofthe summary transactions listed above.

2.

Prepare the adjusting journal entries.


3.

Prepare the closing entries.




4.

Post the opening balances, transactions,adjusting and closing entries into the appropriatet-accounts.

5.

Prepare an unadjusted trial balance.


6.

Prepare an adjusted trial balance.

7.

Prepare an income statement for 2013.


8.

Prepare a balance sheet as of December 31,2013.


9.

Prepare a post-closing trial balance.