HBS CORE - FINANCIAL
ACCOUNTING - ADJUSTING
JOURNAL ENTRIES WITH
COMPLETE SOLUTIONS
Which transactions trigger exchange of resources between 2 parties? - ANSWER-
Explicit transactions
e.g. invoices --> recorded entry e.g. PepsiCo sells new piece of equipment, taking
out bank loan, paying income tax, selling inventory to a customer
What transactions gave no trigger and require some degree of judgement in
determining the timing and amount of journal entries? - ANSWER-Implicit
transactions
e.g. Pepsi Co CEO recognize exp as equipment used, accruing interest on loan,
accruing for taxes payable
4 triggers of implicit transactions? - ANSWER-1. No transfer of resources
2. No invoices or other documentation
3. No specific event or activity that clearly triggers journal entry (just the passing of
time)
4. Judgement required regarding when and how much to record
4 triggers of explicit transactions? - ANSWER-1. transfer of resources (usually cash)
2. invoice, receipts, or other paper document
3. specific event/activity that clearly triggers journal entry
4. Clarity regarding when to record and how much to record
What are the 4 types of adjusting journal entries? - ANSWER-1. Prepaid assets
(12mo rent, decrease value monthly) - Credit
2. Deferred Revenue/Unearned revenue (12mo. magazine subscription. every mo.
liab. acc. decrease, revenue recog. as earned) - Debit
3.Accruing of unrecorded expenses (at end of acct'g period e.g. prop tax, interest
expense)
4.Accruing of unrecorded revenue (at end of acct'g period. Rev earned but not yet
billed. e.g. consultant services in Dec, done, billed in Feb is recorded as revenue) -
Credit
What is difference between an accrual and deferreal? - ANSWER-Time.
ACCOUNTING - ADJUSTING
JOURNAL ENTRIES WITH
COMPLETE SOLUTIONS
Which transactions trigger exchange of resources between 2 parties? - ANSWER-
Explicit transactions
e.g. invoices --> recorded entry e.g. PepsiCo sells new piece of equipment, taking
out bank loan, paying income tax, selling inventory to a customer
What transactions gave no trigger and require some degree of judgement in
determining the timing and amount of journal entries? - ANSWER-Implicit
transactions
e.g. Pepsi Co CEO recognize exp as equipment used, accruing interest on loan,
accruing for taxes payable
4 triggers of implicit transactions? - ANSWER-1. No transfer of resources
2. No invoices or other documentation
3. No specific event or activity that clearly triggers journal entry (just the passing of
time)
4. Judgement required regarding when and how much to record
4 triggers of explicit transactions? - ANSWER-1. transfer of resources (usually cash)
2. invoice, receipts, or other paper document
3. specific event/activity that clearly triggers journal entry
4. Clarity regarding when to record and how much to record
What are the 4 types of adjusting journal entries? - ANSWER-1. Prepaid assets
(12mo rent, decrease value monthly) - Credit
2. Deferred Revenue/Unearned revenue (12mo. magazine subscription. every mo.
liab. acc. decrease, revenue recog. as earned) - Debit
3.Accruing of unrecorded expenses (at end of acct'g period e.g. prop tax, interest
expense)
4.Accruing of unrecorded revenue (at end of acct'g period. Rev earned but not yet
billed. e.g. consultant services in Dec, done, billed in Feb is recorded as revenue) -
Credit
What is difference between an accrual and deferreal? - ANSWER-Time.
