Accounting for Accrued Revenue and Expenses

Vocabulary

100

Revenue earned in one fiscal period but not received until a later fiscal period

Accrued Revenue

200

Interest earned but not yet received

Accrued Interest Income

300

An entry made at the beginning of the new fiscal period to reverse the adjusting entry in the previous fiscal period

Reversing Entry

400

Define Accrued Expenses

Expenses incurred in one fiscal period by not paid until a later fiscal period

500

Define Accrued Interest Expense

Interest expense incurred but not yet paid

Make it True

100

Accrued expenses are recorded by an adjusting entry at the beginning of the fiscal period

False--reversing entry

200

The adjusting entry for accrued interest expense increases the balance in the liability Accounts Payable

False--Increases the Expense account, Interest Expense

300

The adjusting entry for accrued interest income results in a debit to Interest Income.

False - Credit

400

Making an adjusting entry to record revenue that has been earned but not yet received is an application of the accounting concept Historical Cost.

False-Matching Expenses with Revenue

500

Information to journalize an adjustment for accrued interest income is obtained from the Income Statement columns of a worksheet.

False-Adjustment Columns

Journalizing

100

The entry to journalize the adjusting entry for accrued interest income is:

Debit Interest Receivable, Credit Interest Income

200

The closing entry for interest expense is:

Debit Income Summary, Credit Interest Expense

300

The entry to journalize the reversing entry for accrued interest income is:

Debit Interest Income, Credit Interest Receivable

400

The entry to journalize the closing entry for interest income is:

Debit Interest Income, Credit Income Summary

500

The reversing entry for accrued interest expense is:

Debit Interest Payable, Credit Interest Expense

Accounting Concepts

100

Revenue and Expenses should be recorded in the accounting period in which revenue is earned and expenses are incurred

Matching Expenses and Revenue

200

The balance sheet will report all the assets, including the accrued revenue receivable

Adequate Diosclosure

300

Revenue is recorded at the time that goods and services are sold

Realization of Revenue

400

The actual amount paid for merchandise and other items is what is recorded

Historical Cost

500

The same accounting procedures must be followed the same way in each accounting period

Consistent Reporting

Applying Accounting Concepts

100

Explain how posting adjusting entries for Interest Income applies to the Matching Expenses with Revenue Accounting concept

Adjusting entries attempt to match the Interest Income in the fiscal period it is earned not necessarily when it is collected.

200

Explain how making adjustments for Interest Income applies to the Adequate Disclosure Accounting concept

The Adequate Disclosure Accounting Concept states that the financial statements contain all the information necessary to understand a businesses financial condition. When making adjustments the income statement will then report all revenue earned for that period, even though some of the income may not have not been received. the balance sheet will report all the assets, including the accrued revenue receivable.

300

Explain how the Accounting Concept Realization of Revenue is applied when selling merchandise on Account

The Realization of Revenue Concept says that revenue is recorded at the time goods or services are sold. When a sale is made "on account" it is still recorded at the time of the sale not at the time of the payment.

400

Explain how the concept Objective Evidence has changed with technology.

The Objective Evidence accounting concept says a source document is prepared for each transaction. Most records are now kept in a computer and not hand written checks, receipts, invoices etc.