Chapter 4 ACCT 2010 Questions and Correct Answers

Under the accrual basis of accounting events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. Under accrual- adjusting is made when? at the end of the accounting period Under accrual- adjusting is made to... - update the amounts already recorded in the accounting records - include events that had occurred but had not yet been recorded - ensuring that revenues and expenses are occurring in the correct period AND liabilities and assets are reported at appropriate amounts What statements do adjustments involve? balance sheets and income statement accounts Revenues are recorded when... earned Expenses are recorded in... same period as the revenue to which they relate Assets are reported at... at amounts representing economic benefits that remain at the end of the current year Liabilities are reported at... at amounts that represent the probable future sacrifices of assets or services owed at the end of the period The two categories of adjustments at the end of the accounting period... deferral adjustments, and accrual adjustments What are deferral adjustments? used to decrease balance accounts and increase corresponding income statement accounts What accounts do deferral adjustments involve? must involve one asset and one expense, or one liability and one revenue account income statement includes ______ and _____ which is why it is used when we are adjusting. revenues and expenses ** for a specific time period