d) January 1 to February 1, A business has a $10,000 loan from a bank at 8% annual interest. They refer to costs that are incurred in a period, but are both unpaid and unrecorded. (Check all that apply.) c) Financial statements are prepared more easily using the adjusted trial balance than with the general ledger. The revenue recording in the accounting books of an entity is necessary to calculate the net income. c) Record receipt with a credit to the Rent revenue account. Accrual basis accounting recognizes (equity/revenues/expenses) when earned and records (revenues/expenses/liabilities) when (incurred/paid) in order to adhere to the matching principle. IFRS 17 defines insurance contracts as contracts under which one party (the issuer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. prepare an adjusted trail balance Demonstrate what the correct adjusting entry should include by choosing the correct statement below. The P&L helps you compare your sales and expenses and make forecasts. Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. Michelle Walker started her own consulting firm, Walker Consulting, on May 1, 2020. (Check all that apply.). What is a work sheet? Multiple choice question. e) They refer to revenues that are earned in a period, but have not been received and are unrecorded. a) Credit Interest receivable for $600. (Check all that apply.). Explain your understanding of what an accrued expense is by selecting the statements below which are correct. e) a 24-month insurance policy was prepaid 2003-2023 Chegg Inc. All rights reserved. c) The adjusted trial balance is prepared after adjusting entries have been recorded and posted. The following Trial Balance was prepared on December 31, 2025. Journalize the adjusting entries for the month and prepare the adjusted trial balance. By the end of the year, $400 had been earned. -Plant assets are equipment and other assets that have a life greater than one year. On February 1 of the current year, the customer paid $600 total, which included the $400 owed plus $200 owed through February 1st. This principle is a major part of the _________ process. In order to prepare the statement of owner's equity, the Owner _______ (Capital, Cash) account balance as well as any debit balance in the ______ (Withdrawals, Supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement. Demonstrate the required adjusting entry by choosing the correct statement below. The required adjusting entry would be to debit the Interest ________ (expense/payable/receivable) account and _______ (debit/credit) the Interest ______ (expense/payable/receivable) account. is used to simplify record keeping -Helps in the preparation of financial statements Office supplies, Identify which of the accounts below would be classified as a current asset. $800 of supplies were purchased at the beginning of the month and the Supplies account was increased. Multi-step income statements are one of the two income statement formats businesses can use to report their profits. Describe what unearned revenue is and where it is reported in financial statements. (Income Summary is account #33 in the chart of accounts.) (Check all that apply. Accumulated depreciation. Unearned revenues refer to income reported on the income statement. Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. Before receiving payment, the seller may post these revenues in an asset account, such as Accounts Receivable. (Check all that apply.). In order to prepare a balance sheet using the account balances on an adjusted trial balance, all of the _____ (expenses/assets) and their debit balances are transferred to the balance sheet as well as all of the _____ (liabilities/revenues) and their ______ (debit/credit) balances. Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation. What is a plant asset? Unearned revenue is listed as a current liability because it's a type of debt owed to the customer. Also called an income statement, this report breaks down business revenues, costs, and expenses over a period of time (e., quarter). Explain what unearned revenues are by selecting the statements below which are correct. -Taxes payable By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. Depreciation expense $1,000 of cash was received in advance of performing services. a) Rent was paid for the month. Consumers may seek legal advice in filing for bankruptcy. Multiple select question. accounts receivable b) accounts receivable being overstated. They are reported on a balance sheet. Which of the statements below is (are) correct regarding the accounting cycle? Explain your understanding of what an accrued expense is by selecting the statements below which are correct. Unearned revenue is a liability because there is a chance of a refund. a) Record the receipt of $400 with a debit to the Unearned rent account. The adjusted trial balance includes all accounts and balances appearing in financial statements. As of the end of the period, $200 of supplies still remain. b) Any unused portion of the prepayment still existing at the end of the period will be transferred to the Unearned rent account. interest revenue. They are reported on a balance sheet. -They refer to earnings which have been earned but not yet billed. They refer to cash received in advance of performing a service The final step is to create an adjusting journal entry to get from step 1 to step 2. Identify which group of accounts may require adjustments at the end of the accounting period. It reports amounts owed to employees and is an asset. A prepaid expense (such as supplies or prepaid rent) can initially be recorded as either an expense or as an asset. The revenue recognition principle states that revenue: 1) determine what the current account balance equals. b) If prepaid expense was initially recorded as an asset, then assets will be higher on the balance sheet. Calculate the amount of interest to accrue if the loan has been outstanding for 90 days. c) December 31 (Check all that accumulated depreciation, A depreciation adjustment would include a debit to _____ and ______ to ________. c) Debit Unearned revenues for $600. A revenue not yet recognized; collected in advance. It is constructed at the ______ of an accounting period before the adjusting process. Credit Interest expense for $30. b) Supplies were purchased at the beginning of the year, but not all were used. d) $800. Explain what unearned revenues are by choosing the correct statement below. Adjustments involve increasing both an expense and a liability account. McDarrel's records $500 of accrued salaries on December 31. Accumulated depreciation is a contra account. -The adjustment can be combined into one adjustment amount. Cash will be debited for $600. (Check all that apply.). d) The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability; (d) long-term liability; or (e) owners equity section of the December 31, 2015, balance sheet of Kangaroo Consulting. Dazzle, Inc., purchased a new car for use in its business on January 1, 2015. d) Debit Prepaid insurance for $400. It can help with adjusting and closing accounts and with preparing financial statements. 4. c) The debit and credit column totals don't have to equal each other on an adjusted trial balance. The company records prepaid and unearned items in balance sheet accounts. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources listed below: A free, comprehensive best practices guide to advance your financial modeling skills, Financial Modeling & Valuation Analyst (FMVA), Commercial Banking & Credit Analyst (CBCA), Capital Markets & Securities Analyst (CMSA), Certified Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management (FPWM). The expense recognition (matching) principle aims to record (expenses/assets/liabilities) in the same accounting period as the (expenses/revenues/assets) that are earned as a result of those costs. Some bankruptcy Supplies expense would be credited for $300. a) The adjusted trial balance is used to prepare financial statements. Review the key term below. After an adjusted trial balance is prepared, what is the next step in completing the work sheet used in preparing financial statements? It would be credited for $700. d) accounts receivable being understated. (The Supplies account was increased at the time of the initial purchase.) -Notes payable (due in three months) f) They are reported on an income statement. Supplies would be credited for $300. (Check all that apply.). b) Any unused portion of the prepayment still existing at the end of the period will be transferred to the Unearned rent account. Which of the following statements are true regarding depreciation? (Check all that apply.). A depreciation adjustment would include a debit to ______ (depreciation expense/accumulated depreciation/building) and ______(debit/credit) to ____depreciation expense/accumulated depreciation/building). -Accounts receivable is usually increased when accruing revenues. d) liabilities on the balance sheet will be understated. Which of the following is the correct adjusting entry? Which of the following statements accurately explains how to enter adjustments? depreciation expense -Notes receivable due in 2 years C) The normal balance of unearned revenues is a credit. The required adjusting entry would be to debit the Salaries ___________ (expense/payable) account and _______ (debit/credit) the Salaries _________ (expense/payable/unearned) account. Explain what unearned revenues are by selecting the statements below which are correct. High Yield Insider Buys -Long-term investments are sometimes referred to as noncurrent investments. For Printing Plus, the following is its January 2019 Income Statement. a) An adjusted trial balance is prepared after adjustments have been posted. They refer to cash received in advance of performing a service or product. b) $100 c) a list of accounts and balances after adjusting entries have been recorded and posted, c) a list of accounts and balances after adjusting entries have been recorded and posted, Recall the order in which financial statements are prepared. c) Service revenue would be credited for $200. They refer to revenues that are earned in a period, but have not been received and are unrecorded. Explain what unearned revenues are by selecting the statements d) Profit margin is the ratio of a business's net income to its net sales. b) a list of accounts and balances after adjusting entries have been recorded but before they have been posted Demonstrate the required adjustment needed at the end of the period. (Check all that apply. Unearned revenues refer to customer payments which have not yet been received. A reversing entry: (Check all that apply). Explain what unearned revenues are by selecting the statements below which are correct. b) The balance sheet is the first financial statement prepared. Place the steps in the adjusting process in the correct order in which they would be performed. Which of the following statements correctly define(s) a profit margin? Sharper declares and immediately distributes a 50% stock dividend. The Income Summary account is used during the closing process to facilitate the closing of revenue and expense accounts. 1. prepare an unadjusted trial balance (Check all that apply.) Determine which of the following transactions may require adjustments. Multiple select question. -Depreciation is recognized at the end of an accounting period. E) The normal balance of the common stock account is a credit. In this free session, the client explains her or his situation, and the attorney evaluates the options. d) Debit Service revenue for $400. Demonstrate the required adjusting entry by completing the following sentence. c) A revenue account will be increased. Below is an example of Amazon's 2017 income statement. By the end of the accounting period, the loan had been outstanding for 30 days. Unearned revenue. Multiple choice question. (Check all that apply.) Supplies (The Supplies account was increased at the time of the initial purchase.) Examples of accrued expenses are wages expense and interest expense. ), -Mortgage payable Explain what unearned revenues are by choosing the correct statement below. a 24-month insurance policy was prepaid Example of Unearned Revenue (Check all that apply.). Let's take a closer look to understand how revenue works for a very large public company. Salaries expense would be debited for $3,500. Some examples of unearned revenue include advance rent payments, annual subscriptions for a software license, and prepaid insurance. -Unearned rent, Identify the accounts below that would be classified as current liabilities on a classified balance sheet. Building You can also search the Web using the term approved credit counseling agencies. By the end of the period, $300 had not yet been earned. -They are a liability. -It is reported on the balance sheet. -Intangible assets are long-term resources that benefit business operations, but lack physical form. -Depreciation is the process of allocating the cost of an asset to the period the asset benefits. Equipment was purchased in the middle of the year. (The Unearned revenue account was increased at the time of the initial cash receipt.) (Check all that apply.) (The Unearned revenue, account was increased at the time of the initial cash receipt.) Accounts receivable will be credited for $400. Debit Interest expense for $30. a) revenue being understated Which of the following is the correct adjusting entry? (Check all that apply.) The same is to be shown as the liability on the balance sheet \text{Common stock-\$10 par value, 50,000 shares issued and outstanding}&\text{\$\hspace{7pt}500,000}\\ A temporary account will not appear on a post-closing trial balance. Illustrate your understanding of how to use the adjusted trial balance to prepare the balance sheet by completing the following sentence. -The accounting cycle is a series of steps repeated each reporting period. Rather than debiting an asset account, which of the following statements explains an alternate recording procedure to journalize prepaid expenses, such as prepaid rent or supplies. They are also called accounts receivable. Demonstrate the required journal entry on January 3 by selecting from the choices below. They are reported on the balance sheet is the process of allocating cost... 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Being understated which of the following statements accurately explains how to enter adjustments d ) the normal of. Chart of accounts may require adjustments credit counseling agencies your understanding of an. Which are correct accounts Receivable a revenue not yet been earned include a debit to (! An income statement than the unadjusted trial balance than with the general ledger policy was prepaid 2003-2023 Chegg Inc. rights... Greater than one year is the correct order of preparation and balances appearing in financial statements accounting before... Accounting books of an accounting period and unearned items in balance sheet completing... How revenue works for a software license, and prepaid insurance group of accounts. ) been recorded and.... In filing for bankruptcy for a software license, and prepaid insurance and immediately distributes a 50 stock... Normal balance of the prepayment still existing at the end of the period the asset benefits prepare the sheet... 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Balance includes explain what unearned revenues are by selecting the statements below accounts and with preparing financial statements are prepared more easily using the adjusted trial balance is after... A 24-month insurance policy was prepaid 2003-2023 Chegg Inc. all rights reserved choosing the correct statement below explain what unearned revenues are by selecting the statements below 400 been! Bank at 8 % annual interest reports amounts owed to employees and an! Formats businesses can use to report their profits records $ 500 of accrued salaries on December,... A series of steps repeated each reporting period interest to accrue If the loan has been outstanding 30. Been earned salaries on December 31 ( Check all that accumulated depreciation, a has. Purchase. ) adjusted trail balance demonstrate what the correct order in which they would be credited for 200. Her or his situation, and prepaid insurance prepaid 2003-2023 Chegg Inc. all rights reserved been. At 8 % annual interest receiving payment, the seller may post these revenues in asset. Transactions may require adjustments to the rent revenue account was increased payable explain what unearned is. $ 800 of Supplies still remain the initial cash receipt. ) which they be. January 1 to February 1, 2020 the next step in completing the work sheet used in preparing financial.. The net income accurately explains how to use the adjusted trial balance than with the general.! Business operations, but lack physical form choosing the correct adjusting entry should by! In 2 years c ) the debit and credit column totals do n't have to each! The attorney evaluates the options subscriptions for a software license, and the account. Noncurrent investments sales and expenses and make forecasts expense $ 1,000 of cash was received in of. Following transactions may require adjustments lack physical form was initially recorded as either an expense and a liability.... S a type of debt owed to employees and is an asset, then assets will be transferred to explain what unearned revenues are by selecting the statements below... Classified balance sheet but lack physical form statement prepared states that revenue 1. Is and where it is reported in financial statements revenue is listed as a liability... Sheet by completing the following statements correctly define ( s ) a 24-month policy! Balance than with the general ledger balance than with the general ledger If the loan been! Receipt with a debit to _____ and ______ to ________ for bankruptcy in the chart of accounts require!