{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

pg_0014 - a egory'aance ee ncome a emen ujus mg n ry...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: a egory 'aance ee ncome a emen - ujus mg n ry Prepaid expensesl Asset overstated Expense understated Dr. Expense Equity overstated Cr. Asset* Unearned revenuesl' Liability overstated Revenue understated Dr. Liability Equity understated Cr. Revenue Accrued expenses Liability understated Expense understated Dr. Expense Equity overstated Cr. Liability Accrued revenues Asset understated Revenue understated Dr. Asset Equity understated Cr. Revenue * For depreciation, the credit is to Accumulated Depreciation (contra asset). l Exhibit assumes that prepaid expenses are initially recorded as assets and that unearned revenues are initially recorded as liabilities. Information about some adjustments is not always available until several days or even weeks afier the period—end. This means that some adjusting and closing entries are recorded later than, but dated as of, the last day of the period. One example is a company that receives a utility bill on January 10 for costs incurred for the month of December. When it receives the bill, the company records the expense and the payable as of December 31. Other examples include longaiistance phone usage and costs of many Web billings. The December income -' 92 statement eflects these additional expenses incurred, and the December 31 balance sheet includes these payables, although the amounts were not actually known on December 31. -' 93 Decision Ethics 1 Financial Oflicer At year—end, the president instructs you, the financial officer, not to record accrued expenses until next year because they will not be paid until then. The president also directs you to record in currenteyear sales a recent purchase order from a customer that requires merchandise to be delivered two weeks afier the yearend. Your company would report a net income instead of a net loss if you carry out these instructions. What do you do? [Answer—p. 123 Quick Check: Answers—p. m 5. If an adjusting entry for accrued revenues of $200 at year—end is omitted, what is this error's effect on the year—end income statement and balance sheet? 7. What is a contra account? Explain its purpose. 8. What is an accrued expense? Give an example. 9. Describe how an unearned revenue arises. Give an example. Adjusted Trial Balance P2 Explain and prepare an adjusted trial balance. An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded. An adjusted trial balance is a list of accounts and balances prepared rzfi‘er adjusting entries have been recorded and posted to the ledger. Exhibit 3.13 shows both the unadjusted and the adjusted trial balances for FastForward at December 31, 2009. The order of accounts in the nial balance is usually set up to match the order in the chart of accounts. Several new accounts arise from the adjusting entries. .- 93 EXHIBIT 3.13: Unadjusted and Adjusted Trial Balances 3- WE. 5‘“ View Wfificfmat Whig DWI WWWIQ — ___.___ _ _ .._ .. _. 4W DESI *5- “ 'ltlil 2-: tl'iiii an lfl:’-lmftlfi eel 9-210. all '1 Ilfl it. as a at! ‘3 I I ' I ' I I - - o - O I " 1 I ‘ I .3 . . . . - . . . _ : ' ' . 4'; I I I Acct. .- ;- Account Title :5- Cash $ 4,350 4,350 21 Accounts receivable 0 (f) $1.800 1,800 4; Su lies 9,?20 (0) $1,050 8,670 .9 Prepaid insurance 2.400 (a) 100 2,300 w- Equipment 26,000 26,000 _ 11' Accumuiated depreciation—Equip. $ 0 {C} 375 $ 375 is. Accounts oavable 6.200 6.200 ...
View Full Document

{[ snackBarMessage ]}