Adjusting Entries

The accounting concept which states that income is recognized when earned regardless of when collected and expense is recognized when incurred regardless of when paid. 

• Deferral

• Accrual

• Depreciation

• Time Period

Represent advance payments made for expenses which have not yet been incurred, used, utilized or consumed.

• Accrued Expense

• Unearned Expense

• Prepaid Expense

• Account Expense

Adjusting entries are necessary to

• 
  record the sales of the period

• ensure the equality of the debits and credits

• Update and correct the accounts at the end of the period

• 
  balance the books at the end of the period

Which adjusting entry is needed when a business receives payment for a service it has not yet provided?

• Accrued revenue

• Unearned revenue

• Prepaid expense

• Depreciation

Which of the following is an example of a deferral?

• Recording unpaid salaries at the end of the month

• Recognizing earned revenue that has not been collected

• Paying for a one-year insurance policy in advance

• Estimating bad debts

What are the two types of deferrals?

• Prepaid expenses and accrued revenues

• Unearned revenue and prepaid expenses

• Accrued expenses and accrued revenues

• Depreciation and prepaid expenses

Which of the following is a common example of a prepaid expense?

• Accounts payable

• Unearned service revenue

• Prepaid insurance

• Salaries payable

Before adjustment, unearned revenue is classified as:

• An expense

• An asset

• A liability

• Equity

Which of the following is an example of unearned revenue?

• Paying rent for the next six months

• Receiving payment for a one-year gym membership before services are provided

• Buying office supplies for future use

• Recording depreciation on equipment

Which of the following is an example of a deferral?

• Recording unpaid salaries at the end of the month

• Recognizing earned revenue that has not been collected

• Paying for a one-year insurance policy in advance

• Estimating bad debts