Chap 11: Prepayments & Accruals

The accrual concept states that _____ during a financial period, regardless of _______.

• income and expenses are recorded when they are earned and incurred respectively, when collection is received and

  payment is made.

• assets and liabilities are recorded , when they occurred.

An example is utilities used in December 2018 but which has not been paid in December 2018 must be recorded in the Income Statement for the period ended 2018. This is an application of ___ concept.

• Accrual

• Matching

• Accounting period

• Objectivity

The _______ concept states that for a given financial period, only the expenses incurred to generate

the income reported during the period should be recorded in the same period.

• Accrual

• Matching

• Accounting period

• Objectivity

An example is freight charges incurred in delivery of goods sold must be recorded in the same financial year where the sales revenue of such sale of goods is reported in. This is an application of __ concept.

• Accrual

• Matching

• Accounting period

• Objectivity

Prepaid rent is recorded as ____ in the Balance Sheet.

• Current assets

• Current liabilities

Commission income received in advance is recorded as ____ in the Balance Sheet.

• Current assets

• Current liabilities

Journal entry to adjust for Accrued utilities at year end: Dr__ & Cr__.

• Dr Utilities (expense) Cr Accrued utilities (CL)

• Dr Prepaid utilities (CA) Cr Accrued utilities (CL)

• Dr Accrued utilities (CL) Cr Utilities (expense)

Accrued salaries is recorded as ____ in the Balance Sheet.

• Current assets

• Current liabilities

Prepaid salaries at beginning of the year is recorded in ____ column of Salaries Expense account.

• +

• -

• Balance

Accrued salaries at year-end is recorded in ____ column of Salaries Expense account.

• +

• -

• Balance