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Adjustments
Toolkit Moment
Vocab
The Accounting Cycle
100
How do prepaid expenses affect debit and credit?
Debit Expenses Credit Assests
100
What sort of documents can be prepared from a trial balance?
Income statement Retained earnings statement Classified Balance sheet
100
Name the temporary accounts.
All revenue accounts All expense accounts Divedends
200
Which accounts are over/understated before the accrued expenses adjustment?
Expenses understated Liabilities understated
200
When should a company record revenue?
The moment it is earned
200
Under which account are the revenues and expenses closed to? Hint: It's imaginary.
Income Summary
300
What's the reason for adjustment on interest, rent or salaries?
Expenses have been incurred but not yet paid in cash or recorded. This means that expenses and liabilities before the adjustment would be understated.
300
When should expenses be recorded?
Expenses always follow revenues. Record the expense when you record the revenue.
300
Describe what a post closing trial balance is.
A list of all permanent account balances that the company carries forward into the next accounting period. Aka - Permanent balance sheet accounts
400
Four types of basic adjusting entries.
Prepaid expenses Unearned revenues Accrued revenues Accrued expenses
400
Why is depreciation considered an allocation concept versus a valuation concept?
Depreciation ALLOCATES an asset's cost to period in which it is used, it does not attempt to report a change to the value.
400
What is high quality of earnings?
Information about a company that will not confuse or mislead users of the financial statements
500
Under which two types of adjustments are revenues understated?
Unearned revenues Accrued revenues
500
Prepare closing enteries of the accounts Dividends 24000 Retained Earnings 50000 Income Summary 20000 (credit balance)
Income summary 20000 Retained Earnings 20000 (to close net income to retained earnings) Retained Earnings 24000 Dividends 24000 (to close dividends to Retained earnings)
500
What is earnings management?
Planned timings of revenues, expenses, gains and losses that smooth out bumps in net income.
500
First five steps of the accounting cycle. Bonus 200 if you get all nine.
Analyze business transactions Journalize the transactions Post to ledger accounts Prepare a trial balance Journalize and post adj. entries: Deferrals/Accruals Prepare and adjusted trial balance Prepare financial statements: Income, RE, Balance Journalize and post closing enteries Prepare a post-closing trial balance