Exam 3: The Adjusting Process

The goal of the time period concept is to compute an accurate net income or net loss.

The unadjusted trial balance of James Business Consulting at December 31,2018,and the data for the adjustments follow: James Business Consulting Unadjusted Trial Balance December 31,2018 Data for adjustments: a.James prepaid 6 months of business insurance on September 30,2018,with coverage beginning on October 1.James treats deferred expenses initially as assets. b.A physical count of office supplies was made on December 31,2018.This count showed a balance of $4,200 office supplies on hand. c.On December 31,2018,James received a bill for the November and December advertising in a local newspaper,$800.This bill will be paid on its due date,which is 1/10/2019. James is preparing financial statements for the quarter ending December 31,2018. Requirements 1.Journalize the adjusting entries on December 31,2018. 2.Prepare the December 31,2018 adjusted trial balance.Use a proper heading.

For each of the following statements,indicate whether it applies to: the cash basis of accounting (cash basis) the accrual basis of accounting (accrual basis) both the cash and accrual basis of accounting (both) neither the cash nor the accrual basis of accounting (neither). Your response should be cash basis,accrual basis,both,or neither.

The revenue recognition principle requires companies to follow a five-step process.List these five steps.

Deferred expenses are advanced payments of future expenses

If a company is using accrual basis accounting,when should it record revenue?

The following extract was taken from the worksheet of Miller and Miller Company for the year 2019. From the above information,determine the amount of the Rent Expense adjustment.

The adjusted trial balance is prepared after the adjustments have been journalized and posted.

The matching principle ensures all expenses are recorded when they are incurred during the period and are matched to the cash payments for expenses.

Generally Accepted Accounting Principles (GAAP)require the use of the accrual basis of accounting.

The major difference between a cash basis accounting system and an accrual basis accounting system is the timing of recording revenues and assets.

Which of the following entries would be made because of the matching principle?

The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle.

During December 2018,April Service Company performed $1,500 of services,but as of December 31,2018,the clients have not yet been billed.If April fails to make an adjusting entry on December 31,2018,indicate the effect on assets,liabilities,equity,and net income.

Which of the following is considered a fiscal year?

In the case of deferred revenue,the adjusting entry at the end of the period includes a debit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

Deferred Revenue is a liability created when a business collects cash from customers in advance of completing a service or delivering a product.

For each of the following statements,indicate whether it applies to: the cash basis of accounting (cash basis) the accrual basis of accounting (accrual basis) both the cash and accrual basis of accounting (both) neither the cash nor the accrual basis of accounting (neither). Your response should be cash basis,accrual basis,both,or neither.

If net income is overstated,equity will be understated.

Jones Financial Services Company performed accounting services for a client in December.A bill was mailed to the client on December 30.The company received the client's check by mail on January 5.Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed?