Exam 3: The Adjusting Process

Under the accrual basis, some accounts in the ledger require updating. Discuss the three main reasons for this updating and give an example of each.

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

Deferrals are recorded transactions that delay the recognition of an expense or revenue.

The financial statements measure precisely the financial condition and results of operations of a business.

Using accrual accounting, revenue is recorded and reported only

On December 31, the balance in the Office Supplies account is $1,385. A count shows $435 worth of supplies on hand. Prepare the adjusting entry for supplies.

The general term used to indicate delaying the recognition of an expense already paid or of a revenue already received is

One of the accounting concepts upon which deferrals and accruals are based is

If the adjustment for depreciation for the year is inadvertently omitted, the assets on the balance sheet at the end of the period will be understated.

Accrued revenues would appear on the balance sheet as

The general term employed to indicate an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is

Depreciation on equipment for the year is $6,300. (a) Record the journal entry if the company adjusts its account once a year. (b) Record the journal entry if the company adjusts its account on a monthly basis.

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

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?

An example of deferred revenue is Unearned Rent.

Fees receivable would appear on the balance sheet as a(n)

Which of the following is considered to be an accrued expense?

The account type and normal balance of Prepaid Expense is

The balance in the unearned fees account, before adjustment at the end of the year, is $10,250. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,125.

Which of the following is an example of a prepaid expense?