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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 3, Problem 18GI
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 22GI
Problem 23GI
Problem 24GI
Problem 25GI
Problem 26GI
Problem 27GI
Problem 28GI
Problem 29GI
Problem 30GI
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 12P
Problem 13P
Problem 14P
Problem 15P
Problem 16P
Problem 17P
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Explain why companies sometimes recognize accruals for accrued expenses and accrued revenues. Give an example of an adjusting entry to record each of these items.

To determine

Explain the reason why the companies sometime recognize accruals for accrued expense, and accrual revenues, and give an example of an adjusting entry to record each of these items.

Explanation

Accrual accounting: The method of accounting which recognizes revenues before they are received, and recognizes expenses before they are paid, is referred to as accrual accounting.

Explain the reason why the companies sometime recognize accruals for accrued expense, and accrual revenues, and give an example of an adjusting entry to record each of these items as follows:

Accrual expense:

Accrual expense is an expense that is incurred during the accounting year but neither paid nor recorded.

Example:

Assume a company pays salaries to employee once a month on the 15th of the each month. The monthly salary payment is $6,000. On December 31, the following adjusting entry is necessary,

DateAccount Title & ExplanationDebit ($)Credit($)
December 31Salaries expense ($6,000×12)3,000 
 Salaries payable 3,000
 (To record the salaries expense accrued at the end of the accounting year)

Table (1)

Accrual revenue:

Accrual revenue is revenue that is recognized during the accounting year but neither received nor recorded.

Example:

Assume a company has purchased $6,600 notes at 12% interest on November 1

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Ch-3 P-1GICh-3 P-2GICh-3 P-3GICh-3 P-4GICh-3 P-5GICh-3 P-6GICh-3 P-7GICh-3 P-8GICh-3 P-9GICh-3 P-10GI
Ch-3 P-11GICh-3 P-12GICh-3 P-13GICh-3 P-14GICh-3 P-15GICh-3 P-16GICh-3 P-17GICh-3 P-18GICh-3 P-19GICh-3 P-20GICh-3 P-21GICh-3 P-22GICh-3 P-23GICh-3 P-24GICh-3 P-25GICh-3 P-26GICh-3 P-27GICh-3 P-28GICh-3 P-29GICh-3 P-30GICh-3 P-1RECh-3 P-2RECh-3 P-3RECh-3 P-4RECh-3 P-5RECh-3 P-6RECh-3 P-7RECh-3 P-8RECh-3 P-9RECh-3 P-10RECh-3 P-11RECh-3 P-1ECh-3 P-2ECh-3 P-3ECh-3 P-4ECh-3 P-5ECh-3 P-6ECh-3 P-7ECh-3 P-8ECh-3 P-9ECh-3 P-10ECh-3 P-11ECh-3 P-12ECh-3 P-13ECh-3 P-14ECh-3 P-15ECh-3 P-1PCh-3 P-2PCh-3 P-3PCh-3 P-4PCh-3 P-5PCh-3 P-6PCh-3 P-7PCh-3 P-8PCh-3 P-9PCh-3 P-10PCh-3 P-11PCh-3 P-12PCh-3 P-13PCh-3 P-14PCh-3 P-15PCh-3 P-16PCh-3 P-17P

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