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ACCT 211 Chapter 4: Chapter 4: Accrual Accounting and Adjusting Entries

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School
Binghamton University
Department
Accounting
Course
ACCT 211
Professor
Elliot Kamlet

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Document Summary

Application of the revenue recognition and matching principles: revenues such as job wages are recorded when earned, regardless of when payment is received. Ii. cash based income is normal greater than accrual based income. Adjusting journal entries: made in the general journal to record revenues that have been earned but not recorded and expenses that have been incurred but not recorded. The company has no yet provided the promised service and therefore can"t record a revenue in its accounting system. Instead, it must record a liability: subscription revenue an example of deferred revenue adjustment is a company that sells 12-month subscriptions to its monthly magazine. On oct 1, the company receives a total of. When a company receives cash before it provides a service, the company should always increase a liability account for the amount received as the company provides the service, the liability account decreases and the related revenue account increases.

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Related Questions

Which of the following is not a characteristic of the accrual basis of accounting?

a. Revenues and expenses are reported in the period in which cash is received or paid

b. Revenues are reported in the income statement in the period in which they are earned

c. Supports the matching concept

d. All are correct.

 

 

1. Undercash-basis accounting, when is revenue recorded? When is itrecorded under accrual-basis accounting?

2. Under accrualaccounting, when is revenue considered earned?

3. If amembership represents an advance payment for services provided,when is it recognized as revenue under the accrual basis, and whatis it called?

4. Why isinsurance expense spread over multiple periods even though thepolicy coverage is paid in advance?

5. At the end ofthe month for Silver’s Gym, what entries need to be made under thecash basis of accounting for wages that have not yet been paid?What entries need to be made under the accrual method?

6. Why is itimportant to match expenses and revenues to reflect the performanceof a business over a particular time period?

7. When mightthe use of cash basis accounting overstate the actual profitsearned by Silver’s gym? When might it understate the actual profitsearned?

8. Which basisof accounting is in accordance with GAAP for large companies?

QuickBook Questions

1.The Chart of Accounts is the list of accounts such as assets, liabilities, equity, revenues and expenses, which the company intends to use.

True or False

2. The General Ledger and Subsidiary Ledger are the same.

True or False

3. In QB, what is your menu choice to customize custmer payment terms.

A. Lists - Customer & Vendor Profile Lists - Terms

B. Edit - Preferences

C. Customizing the Chart of Accounts List

D. Easy Step Interview

4. The option for making accounts numbers active is

A. Account numbers

B. dimmed account type

C. Edit - preferences

D. Lists- customer & vendor profile lists - terms

5. The type of accounting method used when you recognized revenues when earned and expenses when incurred is referred to as

A. Cash basis of accounting

B. Accrual basis of accounting

C. Tax basis of accounting

D. Corporate basis of accounting

6. Which ledger account would have a subsidiary ledger account attached to it?

A. Accounts Receivable

B. Accounts Payable

C. Inventory Account

D. All accounts listed would have a subsidiary account.

7. If a customer account is listed as 2/10 Net 30 days, you are not allowing any discounts for early payment.

True or False

8. If you change your reports to cash basis from accrual basis, this change will not affect the information displayed on the report.

True or False

9. A trial balance will list all accounts and their balances for a business. This report will give you the Dr or Cr balance of these accounts; however, this report will not tell you if you entered the amounts in the correct accounts.

True or False