Accruals vs Cash
Revenues are recorded when products/services are delivered under this method.
What is the accrual basis?
Prepaid expenses are recorded as what type of account before adjustment?
What is an asset?
Accrued expenses are costs that are incurred and __________.
What are unpaid/unrecorded?
Which financial statement is prepared first?
What is the income statement?
At year-end, revenues, expenses, and dividends are reset to zero. What are these accounts called?
What are temporary accounts?
This basis records expenses only when cash is paid.
What is the cash basis?
A client pays $3,000 in advance for 60 days of service. How much is earned revenue after 5 days?
What is $250? (5 ÷ 60 × $3,000)
On Dec. 31, an employee has worked 3 days at $70/day but hasn’t been paid. What adjusting entry is needed?
Salaries Expense $210; Salaries Payable $210
What statement proves credits and debits equal after adjustments have been made?
What is adjusted trial balance?
Revenue accounts are closed into which temporary account?
What is Income Summary?
FastForward pays $2,400 on Dec. 1 for a 24-month insurance policy. How much expense is recorded in December under the accrual basis?
What is $100? (one month’s expense: $2,400 ÷ 24 months)
Supplies of $9,720 are purchased, with $8,670 unused at year-end. What is the adjusting entry for Supplies Expense?
Supplies Expense $1,050; Supplies $1,050 (to record used supplies)
FastForward’s client agrees to pay $2,700 on Jan. 10 for 30 days of services starting Dec. 12. How much revenue is recognized in December?
What is $1,800? (20 days ÷ 30 × $2,700)
What section of the balance sheet shows assets expected to be used up or converted to cash within one year?
What are current assets?
After closing entries, which type of accounts remain with balances?
What are permanent accounts? (assets, liabilities, equity)
What principle requires expenses to be recorded in the same period as the revenues they help generate?
Equipment purchased for $26,000 has a $8,000 salvage value and 5-year life. What is one month’s depreciation using straight-line?
What is $300? ($18,000 ÷ 60 months)
What type of account is increased when accrued revenue is recorded?
What is an asset (Accounts Receivable)?
Name two examples of intangible assets.
What are patents, trademarks, copyrights, franchises, or goodwill? (any two)
Dividends are closed directly to which account?
What is Retained Earnings?
Explain why $2,400 of insurance paid in 2026 would NOT all be expensed in that year under accrual accounting.
Because expenses must be matched with the periods they benefit — only a portion is expensed each year, not the full $2,400.
What account is credited in the adjusting entry for depreciation?
What is Accumulated Depreciation?
On 12/12, FF signs a contract for 30 days of work for $2,700. On 12/31, FastForward recorded accrued revenue earned of $1,800 (20 days at $90 per day). List the transaction
Debit AR 1,800
Credit Consulting Rev 1,800
List the four financial statements prepared from the adjusted trial balance in order.
What are (1) Income Statement, (2) Statement of Retained Earnings, (3) Balance Sheet, and (4) Statement of Cash Flows?
After closing the Expense and Revenue Accounts, Income Summary has a $111,500 credit balance. What is the transaction to close it?
Debit Income Summary $11,500 and Debit Retained Earnings $111,500