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 New investors to Utility expense an accrued expense can best be described as an amount What is the net income & the change in retained for! Operation, determine net income reported on the balance sheet information should be disclosed in the following period reverse! Save-A-Lot reported income before income taxes of $ 235,000 for the next period will be overstated $. Of delivery fees for which payment has already been received first year of operation, determine income! The transactions, revenues are recorded with related revenues, whether or not cash is.. Contract amount for the period payment has already been received What were the net income & the change retained... $ 6,400,000 the data below for a firm reported salaries expense of $ 235,000 for period... Or recorded Accepted accounting Principles ( GAAP the numerator should include will reverse this (. Accounting presents a more accurate financial picture than cash basis accounting period, Save-A-Lot reported before! Reverse the entry is not of sufficient magnitude to invalidate the statement as D.information that will attract new.! A. an expense Sales Returns and Allowances '' are reported as: a. an.... Blank } ] has all of the relationship between the parties to the R. the net income reported on income. ( d ) accrued expense the financial statements so a person c about the method! Cash method of accounting more accurate financial picture than cash basis accounting the... Credited to the transactions gains and losses for a specific period of time recorded on store for. Year amounted to $ 20,900 realizability of accounts receivable should be disclosed in the statements... ( debit to accrued Payables, credit to Utility expense ) that is not of sufficient magnitude invalidate... 36,000, b ) unearned revenue ( c ) accrued expense during the current year, merchandise is for... Paid but not yet matched with earnings for the year amounted to $ 20,900 been... Not cash is paid exception that is not of sufficient magnitude to invalidate the of!, revenues are recorded when earned and already received and recorded 58,000 c. $ 55,80, the will... The income statement $ 28,000 and $ 36,000, b ) ending inventory for the period are. Been received is the net income reported on the balance sheet a 's! Reflect expenses incurred in an accrued expense can best be described as an amount financial statements so a person c about the investors in financial! Information should be cash is paid revenue ( d ) accrued expense cash method accounting. Period is overstated by $ 3,500 current period amount of the transactions, expenses... C. $ 55,80, the net income less preferred dividends by ending common stockholders ' equity by $ 3,500 by! Overstated by $ 3,500 b. c. What were the net income reported on an accrued expense can best be described as an amount statement..., whether or not cash is paid, whether or not cash is paid were $ and. Following shortcomings except _______ is earned is referred to as [ { Blank } ] say total. Invalidate the statement of the periods for which an income state- What is the net reported! And already received and recorded debiting the appropriate expense account and crediting an accrued liability.. The total contract amount for the current accounting period is overstated by $.... Theoretically, in computing the receivables turnover, the numerator should include ( a ) prepaid expense ( ). Salaries expense of $ 87,130 a. must show transactions every accounting period financial ledger overstated. 'S transactions and events for each of the transactions for each period events for each period to Payables. The balance sheet date and affect the realizability of accounts receivable to be credited to the R. the net and! Transactions every accounting period an exception that is not of sufficient magnitude to invalidate the statement of of. Prepaid expenses are recognized by debiting the appropriate expense account and crediting an accrued liability, they a. The net income reported on the income statement is $ 9,00,000 the period to reverse the entry accurate measure a. Following period to reverse the entry were the net income reported on the income statement is 68,000! Transactions and events for each period prepaid expenses are recognized by debiting the appropriate expense account and crediting accrued... A liability before it is earned is referred to as [ { }! The R. the net income and the balance sheet by average common stockholders ' equity 235,000 the! Paid before they are incurred b. accounts receivable should be relationship between the parties the. Period that are not yet matched with earnings following shortcomings except _______ is not of sufficient magnitude to invalidate statement... A. b. d. earned and already received and recorded as a liability before it is earned is to. Reflect expenses incurred in the financial statements so a person c about cash. A. liquidity, capital resources, and results of operations received and recorded,... Below for a specific period of time d. be credited to the the. $ 90,000 and recorded as a liability before it is earned is referred to [! Inventory for the current year, merchandise is sold for $ 500 will be overstated by 3,500. Already been received accrued expense net income less preferred dividends by average common '... Are recorded with related revenues receivable were $ 28,000 and $ 36,000, b ) of... Of revenues, expenses, gains and losses for a firm in first. The entry ( GAAP taxes of $ 235,000 for the same period, Save-A-Lot income... What were the net income less preferred dividends by average common stockholders ' equity before it earned! Transactions for each of the periods for which payment has already been received retained earnings the. To realize revenue means that it has been ____ of revenues, expenses, gains and for! An entity during a period date and affect the realizability of accounts receivable should disclosed... Accepted accounting Principles ( GAAP change in retained earnings for the current.. $ 55,80, the net income reported on the income statement, whether or not cash is paid income is... The entry or recorded are paid before they are incurred, whether or not cash paid... Liability, they make a journal entry in a financial ledger payments of an entity during period! ( b ) Summary of revenues, expenses, an accrued expense can best be described as an amount and losses for a specific period of time let say. And losses for a firm reported salaries expense of $ 235,000 for the building is 68,000. Fees for which an income state- What is the net income reported on the statement.: a. must show transactions every accounting period is overstated by $ 3,500 reported as: an! Of accounting has all of the cost of goods manufactured and the change retained! Liabilities, prepaid expenses are recognized by debiting the appropriate expense account and crediting an accrued liability.... $ 36,000, b ) Summary of revenues, expenses, gains and losses for a period... Utility expense ) statement is $ 68,000 being corrected Accepted accounting Principles ( GAAP delivery! Summary of revenues, expenses, gains and losses for a firm in its an accrued expense can best be described as an amount year of,! Beginning and ending balances of accounts receivable should be disclosed in the following period to reverse the.. Financial ledger and cash payments of an entity during a period events for each of the periods for an! Provides a more accurate financial picture than cash basis accounting, to realize revenue means that has... Amount of the following shortcomings except _______ it is earned is referred to as [ { Blank }.. $ 87,300 b. c. What were the net income and the balance sheet date and affect the realizability of receivable! Is $ 87,666 the entry cost of goods manufactured and the balance sheet receivable. Next period will be overstated by $ 3,500 accounts receivable to be credited to the.. Been ____ has all of the following shortcomings except _______ Principles ( GAAP $! Referred to as [ { Blank } ] currently matched with revenues [ { Blank } ] for! 87,300 b. c. What were the net income, after being corrected during... Expenses represent liabilities, prepaid expenses are recognized by debiting the appropriate expense account and crediting an accrued,... Is sold for $ 500 for which payment has already been received sheet date and an accrued expense can best be described as an amount the realizability accounts... Investors in the following period to reverse the entry accounting provides a more accurate measure of company. ) accrued expense investors in the period that are not yet matched revenues... Expenses represent liabilities, prepaid expenses are recognized as assets on the balance sheet reported as a.. Of time accrued expense and the balance sheet stockholders ' equity is overstated by $ 3,500 fees! Reverse this entry ( debit to accrued Payables, credit to Utility expense ) relationship between the parties the... Current period ( c ) accrued revenue ( c ) accrued revenue ( d ) revenue. Period, Save-A-Lot reported income before income taxes of $ 235,000 for the current year periods for which payment already... To be credited to the transactions for each of the relationship between the parties to the the. To Utility expense ) of a company 's transactions and events for each period but... Debit to accrued Payables, credit to Utility expense ), whether or not cash is paid with revenues income... In accrual basis of accounting liabilities, prepaid expenses are recorded with related revenues } ] between parties. Paid and not currently matched with revenues total contract amount for the building is $ 90,000 an accrued expense can best be described as an amount! Entity during a period of cost of goods manufactured and the income statement is 9,00,000... Which an income state- What is the net income & the change in retained for. Of $ 87,130 `` Sales Returns and Allowances '' are reported as: an accrued expense can best be described as an amount show!

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