ACC 2010 - Exam 1 with answers \| \| \| \| \| \|
Revenue Recognition Principle - CORRECT ANSWERS ✔✔Customer
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requests service -> Service is performed -> Cash Received (dry cleaning)
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Expense Recognition - CORRECT ANSWERS ✔✔Let expenses follow the
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revenues. (salary for worker who did dry cleaning will follow the revenue
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collected from the service) \| \| \|
Cash Basis - CORRECT ANSWERS ✔✔Recorded when cash is received
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Accrual Basis - CORRECT ANSWERS ✔✔Recorded with transaction, before
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cash is received
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Why adjusting entries are needed? - CORRECT ANSWERS ✔✔1. Ensure that
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revenue recognition and expense are followed
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2. Are required every time a company prepares financial statements
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3. Includes one income statement and one balance sheet
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Prepaid Expenses - CORRECT ANSWERS ✔✔expenses paid in cash before
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they're used (supplies, prepaid, rent, prepaid insurance, depreciation)
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Unearned Revenues - CORRECT ANSWERS ✔✔cash received before services
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are performed
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, Accrued Revenues - CORRECT ANSWERS ✔✔Revenues for services
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performed but not yet received in cash or recorded (interest, dry cleaning)
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Accrued Expenses - CORRECT ANSWERS ✔✔Expenses incurred but not yet
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paid in cash or recorded (taxes, salaries, utilities, interest)
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Basic Accounting Equation - CORRECT ANSWERS ✔✔
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Adjusting Entries for Deferrals - CORRECT ANSWERS ✔✔Prepaid Expenses:
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credit Asset - debit Expense
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Unearned Revenues: debit Liability - credit Revenue
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Adjusting Entries for Accruals - CORRECT ANSWERS ✔✔Accrued
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Revenues: debit Asset - credit Revenue \| \| \| \| \|
Accrued Expenses: debit Expense - credit Liability
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Adjusted Trial Balance - CORRECT ANSWERS ✔✔Purpose: to prove the
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equality of debit balances and credit balances in the ledger
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ATB is primary basis for the preparation of financial statements
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Closing entries - CORRECT ANSWERS ✔✔creates zero balance in temporary
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accounts of income summary (revenue account and expense accounts) and
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dividends. Retained earnings is permanent \| \| \| \|
Revenue Recognition Principle - CORRECT ANSWERS ✔✔Customer
\| \| \| \| \| \| \|
requests service -> Service is performed -> Cash Received (dry cleaning)
\| \| \| \| \| \| \| \| \| \|
Expense Recognition - CORRECT ANSWERS ✔✔Let expenses follow the
\| \| \| \| \| \| \| \| \|
revenues. (salary for worker who did dry cleaning will follow the revenue
\| \| \| \| \| \| \| \| \| \| \| \|
collected from the service) \| \| \|
Cash Basis - CORRECT ANSWERS ✔✔Recorded when cash is received
\| \| \| \| \| \| \| \| \|
Accrual Basis - CORRECT ANSWERS ✔✔Recorded with transaction, before
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cash is received
\| \|
Why adjusting entries are needed? - CORRECT ANSWERS ✔✔1. Ensure that
\| \| \| \| \| \| \| \| \| \| \|
revenue recognition and expense are followed
\| \| \| \| \|
2. Are required every time a company prepares financial statements
\| \| \| \| \| \| \| \| \|
3. Includes one income statement and one balance sheet
\| \| \| \| \| \| \| \|
Prepaid Expenses - CORRECT ANSWERS ✔✔expenses paid in cash before
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they're used (supplies, prepaid, rent, prepaid insurance, depreciation)
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Unearned Revenues - CORRECT ANSWERS ✔✔cash received before services
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are performed
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, Accrued Revenues - CORRECT ANSWERS ✔✔Revenues for services
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performed but not yet received in cash or recorded (interest, dry cleaning)
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Accrued Expenses - CORRECT ANSWERS ✔✔Expenses incurred but not yet
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paid in cash or recorded (taxes, salaries, utilities, interest)
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Basic Accounting Equation - CORRECT ANSWERS ✔✔
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Adjusting Entries for Deferrals - CORRECT ANSWERS ✔✔Prepaid Expenses:
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credit Asset - debit Expense
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Unearned Revenues: debit Liability - credit Revenue
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Adjusting Entries for Accruals - CORRECT ANSWERS ✔✔Accrued
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Revenues: debit Asset - credit Revenue \| \| \| \| \|
Accrued Expenses: debit Expense - credit Liability
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Adjusted Trial Balance - CORRECT ANSWERS ✔✔Purpose: to prove the
\| \| \| \| \| \| \| \| \| \|
equality of debit balances and credit balances in the ledger
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ATB is primary basis for the preparation of financial statements
\| \| \| \| \| \| \| \| \|
Closing entries - CORRECT ANSWERS ✔✔creates zero balance in temporary
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accounts of income summary (revenue account and expense accounts) and
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dividends. Retained earnings is permanent \| \| \| \|
