Accounting: 6-2 Worksheet & Adjusting Entries (Accruals/Deferral

What method does GAAP require public companies to follow?

• Hybrid Method

• Accrual Method

• Direct Method

• Cash Method

What is the purpose of adjusting entries?

• To record new transactions only

• To prepare for tax returns

• To convert records from cash basis to accrual basis

• To correct errors in the ledger

Which of the following is an example of an accrued expense?

• Prepaying insurance premiums

• Dividing a prepayment of rent over its term

• Paying for supplies before they are used

• Recognizing expenses before cash payment

What does a deferral adjusting entry involve?

• Recording revenue before it is earned

• Recognizing an expense before it is incurred

• Payment after an expense or revenue occurrence

• Prepayment of an expense or receipt of cash

How is accrued revenue recorded?

• As revenue

• As an expense

• As an asset

• As a liability

What is the fifth step in the accounting cycle?

• Creating the accounting worksheet

• Recording Transactions

• Preparing Financial Statements

• Posting to a General Ledger

What does the adjusting entry for prepaid insurance do?

• Records a new liability

• Moves part of the Prepaid Insurance to an expense account

• Decreases the Cash account

• Increases the Prepaid Insurance account

What is the correct adjusting entry for supplies if the Supplies account has a balance of $325 and $75 of supplies remain?

• Debit Supplies $250; Credit Supplies Expense $250

• Debit Supplies Expense $250; Credit Supplies $250

• Debit Supplies $75; Credit Supplies Expense $75

• Debit Supplies Expense $75; Credit Supplies $75

What type of adjusting entry is needed when revenue is received before it is earned?

• Deferred Expense

• Accrued Revenue

• Accrued Expense

• Deferred Revenue

What happens to the Unearned Service Revenue account in a deferred revenue adjusting entry?

• It is increased

• It remains unchanged

• It is decreased

• It is eliminated