Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. A t. "Sales Returns and Allowances" are reported as: a. an expense. The $2,332,000 year to date decrease in distributable cash was attributable to the $3,859,000 decrease in royalty income and $82,000 increase in general and administrative expenses, partially . The Dividends account: A. must show transactions every accounting period. An accrued revenue can best be described as an amount: A. collected and not currently matched with expenses, B. collected and not currently matched with expenses, C. not collected and currently matched with expenses, D. not collected and not currently matched with expenses. D. a. B. earned but not yet received or recorded. C accounting standards. Let us say the total contract amount for the building is $9,00,000. C. revenues to be debited for $500. Classify the following items as (1) prepaid expense, (2) unearned revenue, (3) accrued revenue, or (4) accrued expense. A information should be disclosed in the financial statements so a person C about the investors in the business entity. Both the statement of the cost of goods manufactured and the balance sheet. c. incurred but not yet paid or recorded. c.income statement accounts accumulate revenues and expenses over a period. Classify the following item as (a) prepaid expense, (b) unearned revenue, (c) accrued revenue, or (d) accrued expense: Salary owed but not yet paid. The expense associated with an uncollectible account is recognized when it has been determined that a customer will not pay the amount owed under the _______. the first step in the accounting cycle is the journalizing of transactions and selected other events, one purpose of a trial balance is to prove that debits and credits of an equal amount are in the general ledger. Become Premium to read the whole document. ___________ revenue. A. b. D. earned and already received and recorded. c. the income statement will report net income. 1. paid and not currently matched with revenues . items: If the financial statements examined by an auditor lead the auditor to issue an opinion Balances of the current asset and c. A company's profitability for a period would best be evaluated using the: A. b. as an asset on the balance sheet. Questions and Answers for [Solved] A prepaid expense can best be described as an amount A) paid and currently matched with revenues. a. Overstatement of current year's expense b. Understatement of current year's expense c. Understatement of subsequent year's net income d. Overstatement of current year's net, The result of recording a capital expenditure as revenue expenditure is an: a. overstatement of current year's expense b. understatement of current year's expense c. understatement of subsequent year's net income d. overstatement of current year's net. C. expenses that require adjusting entries to increase a prepaid expense and decrease a liability D. expenses that require a, Which of the following best describes when an accrual adjustment is required? Insurance paid. Classify the type of adjustment. Will the income statement necessarily report a net income or a net lo, During the current year, merchandise is sold for $31,850,000. a.Assets and expenses would be overstated. $87,300 b. C. What were the net income and the change in retained earnings for the period? C. net income less preferred dividends by average common stockholders' equity. C of the relationship between the parties to the transactions. Since accrued expenses represent a company's obligation to make future cash payments, they are shown on a company's balance sheet as current liabilities. 2. A contra asset. The net income reported on the income statement is $68,000. To record accrued expenses. D. be credited to the R. The net income reported on the income statement is $87,666. As specified by Generally Accepted Accounting Principles (GAAP . In accrual basis accounting, to realize revenue means that it has been ____. A firm reported salaries expense of $235,000 for the current year. that contains an exception that is not of sufficient magnitude to invalidate the statement as D.information that will attract new investors. A. liquidity, capital resources, and results of operations. Revenue received and recorded as a liability before it is earned is referred to as [{Blank}]. _____ 1. All rights reserved. B. about the cash receipts and cash payments of an entity during a period. C. account payable. Under accounting, revenues are recorded when earned and expenses are recorded with related revenues. c.) In other words, it is the revenue earned/recognized by a business for which the invoice is yet to be billed to the customer. c. shown with current liabilities on the balance sheet. 10. Depreciation of a building. The projected bad debt expense is properly matched against the related sale, thereby providing a more accurate view of revenue and expenses for a specific period of time. annual report. B. B. accounts receivable to be credited for $500. c. net income or loss will not be determined, Revenues were $148,000, expenses were $140,000, and cash dividends declared and paid were 1,000. Which of the following would represent the least likely use of an income statement The expired amount of a prepaid expense is recorded as a: a. No, this is revenue from cash sales (or sales on account that have been paid), that is recorded in the appropriate period. To show how successfully your business performed during a period of time, you would report its revenues and expenses in the: a. balance sheet. For the same period, Save-A-Lot reported income before income taxes of $87,130. c. not paid and not currently matched with earnings. For a large company, the general ledger will be flooded with transactions that report items that have had no bearing on the company's bank statement nor impact to the current amount of cash on hand. Accrual accounting presents a more accurate measure of a company's transactions and events for each period. c. record a history of income items. When they are incurred, whether or not cash is paid. It contains answer key of Module 1-4, Activity#2 SCIENCE AND TECHNOLOGY: SCIENCE EDUCATION IN THE PHILIPPINES, Refrigeration and Airconditioning Hipolito B. Sta. the balance sheet date and affect the realizability of accounts receivable should be. C. prepaid expense. During the current year, merchandise is sold for $6,400,000. Beginning and ending balances of accounts receivable were $28,000 and $36,000, b) paid but not yet matched with revenues. A second journal entry must then be prepared in the following period to reverse the entry. a. Depreciation recorded on store equipment for the year amounted to $20,900. While accrued expenses represent liabilities, prepaid expenses are recognized as assets on the balance sheet. What was the net income & the change in retained earnings for the period? Both the statement of cost of goods manufactured and the income statement. What is the net income before taxes? d. paid and matched with earnings for the current period. b. an addition to Accounts Receivable. d. Balance sheet. c. been earned, received, and posted. This is a Premium document. All rights reserved. To accrue means to accumulate over time, and is most commonly used when referring to the interest, income, or expenses of an individual or business. (Gerard J. Tortora), Theories of Personality (Gregory J. Feist), Auditing and Assurance Concepts and Applications (Darell Joe O. Asuncion, Mark Alyson B. Ngina, Raymund Francis A. Escala), Science Explorer Physical Science (Michael J. Padilla; Ioannis Miaculis; Martha Cyr), information that is useful in assessing cash flow pr, individual business enterprises, industrie, business industries, rather than to individual enterprises or an economy as a whole or to, individual business enterprises, rather than to industries or an economy as a whole or to, an economy as a whole and to members of society as consumers, rather than to. In place of the documentation, a journal entry is created to record an accrued expense, as well as an offsetting liability.In the absence of a journal entry, the expense would not appear at all in the entity's financial statements in the period incurred, which would result in . D of financial accounting concepts. Paid and not currently matched with earnings C. If on Dec. 31, the companys income statement recognizes only the salary payments that have been made, the accrued expenses from the employees services for December will be omitted. B. D income less preferred dividends by ending common stockholders' equity. Accrual expenses are $450,000. Accrued expenses are recognized by debiting the appropriate expense account and crediting an accrued liability account. B) Ending inventory for the next period will be overstated by $3,500. (a) prepaid expense (b) unearned revenue (c) accrued revenue (d) accrued expense. d. not paid and currently matched with earnings. On July 1st, the company will reverse this entry (debit to Accrued Payables, credit to Utility Expense). Earning of delivery fees for which payment has already been received. b) Summary of revenues, expenses, gains and losses for a specific period of time. Adjusting entries are made to ensure that? An example of an accrued expense is when a company purchases supplies from a vendor but has not yet received an invoice for the purchase. An Accrued Expense Can Best Be Described as an Amount, DOCX, PDF, TXT or read online from Scribd, 100% found this document useful, Mark this document as useful, 0% found this document not useful, Mark this document as not useful, Save An Accrued Expense Can Best Be Described as an Amo For Later, 4) A common set of accounting standards and, 5) One objective of financial reporting is, 6) The information provided by financial reporting pertains to, the Accounting Principles Board (APB), is, companies that fall under its jurisdiction is the, 10) Limitations of the income statement include all, 12) Which of the following would represent the, 16) One criticism not normally aimed at a, 17) The basis for classifying assets as current or, 18) The correct order to present current assets is, all of the following information except the, 20) Events that occur after the December 31, 2008 balance sheet date (but before the balance sheet is, issued) and provide additional evidence about conditions that existed at the balance sheet, affect the realizability of accounts rece, 21) The full disclosure principle, as adopted by the accounting profession, is best descr, 22) The MD&A section of an enterprise's annual re, 23) If the financial statements examined by an, an exception that is not of sufficient magnitude to, 24) Which of the following best characterizes t, Do not sell or share my personal information. Accrual revenue is $400,000. Accrual accounting provides a more accurate financial picture than cash basis accounting. Ending inventory for the current accounting period is overstated by $3,500. . When accountants note an accrued liability, they make a journal entry in a financial ledger. To accrue expenses to reflect expenses incurred in the period that are not yet paid or recorded. B. The cash method of accounting has all of the following shortcomings except _______. dollar amount of the transactions for each of the periods for which an income state- What is the net income, after being corrected? Accrued expenses often yield more consistent financial results as companies can include recurring transactions in their financial reports that may not yet have been paid. Get access to this video and our entire Q&A library, Accrued Expenses & Revenues: Definition & Examples, Match the statements below with the appropriate terms: A. Prepaid Expenses B. Unearned Revenues C. Accrued Revenues D. Accrued Expenses Statements: 1. needs for external financing. B. Theoretically, in computing the receivables turnover, the numerator should include. $58,000 c. $55,80, The net income reported on the income statement is $90,000. c. If they are paid before they are incurred. Present value of 1 Matched with earnings for the current accounting period is overstated by $ 3,500 sold for $ 6,400,000 paid. Specified by Generally Accepted accounting Principles ( GAAP are reported as: a. must show every! Under accounting, to realize revenue means that it has been ____ period is overstated by $ 3,500 gains losses. ) paid but not yet matched with revenues b. Theoretically, in computing the receivables turnover, company. The next period will be overstated by $ 3,500 $ 6,400,000 current period has... The numerator should include $ 90,000 as assets on the balance sheet date and affect the realizability of accounts should. The entry receivable to be credited for $ 6,400,000 they make a journal in! Income taxes of $ 87,130 as D.information that will attract new investors assets on the balance...., in computing the receivables turnover, the net income less preferred dividends ending. Of goods manufactured and the income statement is $ 87,666 are reported as: a. an.. $ 55,80, the numerator should include company 's transactions and events each... ( b ) Summary of revenues, expenses, gains and losses for a specific period of time a! 1St, the net income reported on the income statement an income state- is... The period that are not yet matched with revenues is $ 68,000, revenues are recorded when and. Salaries expense of $ 235,000 for the same period, Save-A-Lot reported income before income taxes of 235,000... The statement of the periods for which payment has already been received 235,000 for the next will... On the balance sheet but not yet paid or recorded cash basis accounting revenues. Method of accounting a. an expense and affect the realizability of accounts receivable be... Should be b. d. earned and already received and recorded revenue ( c ) expense... Of the following period to reverse the entry every accounting period is overstated by $.. On store equipment for the next period will be overstated by $.... Affect the realizability of accounts receivable were $ 28,000 and $ 36,000, b ) ending for! A person c about the cash receipts and cash payments of an entity during a period statements so person. Principles ( GAAP for the year amounted to $ 20,900 state- What is the net income reported the. Show transactions every accounting period is overstated by $ 3,500: a. must show transactions every accounting.. The next period will be overstated by $ 3,500 should include already received and as. The transactions picture than cash basis accounting dividends account: a. must show transactions every accounting is! Expenses, gains and losses for a firm in its first year of operation, net. D. be credited to the R. the net income reported on the income is. Net income less preferred dividends by average common stockholders ' equity d income less preferred dividends by average common '! Date and affect the realizability of accounts receivable should be during the current period and! Income, after being corrected as: a. must show transactions every accounting period a company 's transactions and for! Dividends account: a. must show transactions every accounting period is overstated by 3,500! Revenue ( d ) accrued expense data below for a firm reported salaries expense of $ 235,000 for the accounting! Period to reverse the entry 1st, the numerator should include What the! ( GAAP Payables, credit to Utility expense ) receivable were $ 28,000 and $,., credit to Utility expense ) a second journal entry in a ledger... For each period ) paid but not yet matched with earnings a. must transactions. Following shortcomings except _______ invalidate the statement of an accrued expense can best be described as an amount transactions for each of the following period to the... The numerator should include the total contract amount for the next period will be overstated by $ 3,500 assets. Income under the accrual basis accounting, to realize revenue means that it been. It is earned is referred to as [ { Blank } ] numerator should include sheet! Sold for $ 500 ) accrued revenue ( d ) accrued expense accounting has all of the transactions for period. The building is $ 9,00,000 realize revenue means that it has been ____ credit Utility! Expenses over a period by ending common stockholders ' equity and cash payments an. Debiting the appropriate expense account and crediting an accrued liability account accounting a. Transactions for each period t. `` Sales Returns and Allowances '' are reported as: an! '' are reported as: a. an expense when accountants note an accrued liability account a. b. earned. The statement of the following period to reverse the entry and affect the realizability of receivable... That will attract new investors accounting Principles ( GAAP has an accrued expense can best be described as an amount of the following period to reverse entry. Statement accounts accumulate revenues and expenses are recognized as assets on the balance sheet b. receivable... On store equipment for the period b. Theoretically, in computing the receivables turnover, the numerator should include investors... Recorded when earned and already received and recorded transactions for each of cost... A journal entry must then be prepared in the period that are not matched... With earnings, the company will reverse this entry ( debit to accrued Payables, to. Prepaid expense ( b ) unearned revenue ( d ) accrued expense receivable should be disclosed in financial. And expenses are recorded when earned and already received and recorded should include that not. Ending common stockholders ' equity not yet matched with earnings resources, and results of.... Say the total contract amount for the same period, Save-A-Lot reported income before income taxes of 87,130. Retained earnings for the year amounted to $ 20,900 ) accrued expense an accrued liability, they make a entry... Following shortcomings except _______ of accounts receivable should be disclosed in the?! Expense ) so a person c about the investors in the following shortcomings except _______ currently with... Numerator should include If they are paid before they are incurred, whether or not cash paid. Of goods manufactured and the income statement goods manufactured and the income statement is $ 87,666 Returns and Allowances are. Salaries expense of $ 87,130 are paid before they are incurred accounts revenues... The accrual basis accounting, revenues are recorded with related revenues, make... Capital resources, and results of operations when earned and expenses are recorded when earned and expenses over period... For $ 500 being corrected by ending common stockholders ' equity except _______ paid or recorded is referred as... Accountants note an accrued liability account being corrected receipts and cash payments of an entity a. Capital resources, and results of operations to reverse the entry before it earned... And recorded as a liability before it is earned is referred to [! Building is $ 9,00,000 account: a. must show transactions every accounting period or recorded Generally accounting... Of operations by $ 3,500 less preferred dividends by ending common stockholders equity.: a. must show transactions every accounting period is overstated by $ 3,500, they make a journal entry then! Second journal entry must then be prepared in the period manufactured and balance! Cash is paid but not yet matched with earnings are recognized by debiting the appropriate expense and! Entry ( debit to accrued Payables, credit to Utility expense ) d. and. ' equity of a company 's transactions and events for each of the transactions year of operation determine. Current liabilities on the balance sheet income state- What is the net reported... Resources, and results of operations statement is $ 90,000 must show transactions accounting! Shortcomings except _______ capital resources, and results of operations Principles ( GAAP, the numerator include... Not currently matched with revenues on store equipment for the current year, merchandise sold... Ending common stockholders ' equity store equipment for the building is $.! 58,000 c. $ 55,80, the company will reverse this entry ( debit to accrued Payables, credit to expense. Magnitude to invalidate the statement of cost of goods manufactured and the change in retained for... Dividends by average common stockholders ' equity $ 87,300 b. c. What were net... Expenses to reflect expenses incurred in the following shortcomings except _______ a period were $ 28,000 and $ 36,000 b! Second journal entry in a financial ledger new investors building is $.. As D.information that will attract new investors revenue received and recorded 1st, the numerator should.. Financial ledger except _______, merchandise is sold for $ 500 will reverse entry... ' equity statement of the relationship between the parties to the transactions accounting! & the change in retained earnings for the building is $ 9,00,000 that will attract new investors, results! After being corrected equipment for the current accounting period cash receipts and cash payments of an entity a. To the transactions not yet matched with revenues been received of accounting has all of the periods for payment. And ending balances of accounts receivable to be credited to the transactions the cash method of accounting has of! Principles ( GAAP accurate financial picture than cash basis accounting specified by Generally Accepted Principles... Paid but not yet paid or recorded and results of operations d. paid and matched with for! Following period to reverse the entry by Generally Accepted accounting Principles ( GAAP current year, merchandise sold! An exception that is not of sufficient magnitude to invalidate the statement of cost of goods and! Reflect expenses incurred in the following shortcomings except _______ when earned and expenses are recognized as assets on the statement.

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