Vocabulary
Revenues are recognized when they are earned
Accrual Accounting
Prepaid expenses are considered what type of account?
Assets
Will always be debited to adjust for an unrecorded expense
Expenses
What two accounts would be used to journal credit sales for 2024?
Accounts Receivable (Debit) & Sales Revenue (Credit)
Events that raise money by means other than operations
Financing Activities
Entries made at the end of an accounting period
Adjusting Entries
Received advance payment for services yet to be performed
Unearned Revenue
Will always be credited when a prepaid expense account is adjusted
Assets
What two accounts would you use to record bad debts expense for 2024?
Bad Debt Expense (Debit) & Allowance for Bad Debts (Credit)
Buying inventory is an example of what type of business activity?
Operating
This method is only acceptable if bad debts are small, insignificant amounts
Direct write-off method
Sales Returns & Allowances are what type of account?
Contra-Revenue
Will always be debited to adjust for an unrecorded revenue
Receivables
What two accounts would you use to record a direct write off?
Selling products or services is an example of what type of business activity?
Operating
The idea that all expenses incurred in generating revenues should be recognized in the same period as those revenues
Matching Principle
Allowance for Bad Debts is what type of account?
Contra-Account
An adjusting entry to record the portion of unearned revenue that was earned in the current period usually includes a debit to…
A liability account
Each adjusting entry will always affect…
At least one balance sheet account and one income statement account
What types of accounts are generally NOT impacted by adjusting entries?
Capital Stock Accounts
Accounts that are found on the Income Statement and are zeroed out at the end of the year
Nominal Accounts
Revenue items that are earned but have NOT been collected or recognized
Unrecorded Revenues
Using the allowance method, the journal entry required to adjust the accounting records when an amount is collected that had previously been written off as uncollectible would probably include a credit to…
Allowance for Bad Debts
Which of the following will occur if an adjusting entry to record an earned but unrecorded revenue is NOT made?
Both revenues and assets will be understated.
When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of a small account previously written off would…
Increase Allowance for Bad Debts