Deferrals:
Deferrals refer to the revenues that are collected in advance before the services are provided or sales are made to the customer, and the expenses are paid in advance before the expenses are incurred.
Deferrals are classified into two types. They are prepaid expenses, and unearned revenues.
Prepaid expenses: The expenses are paid in cash, before they are incurred.
Unearned revenue: The cash is received, before the services are performed.
Accruals:
Accruals refer to the revenues that are generated from goods delivered or, service performed to the customer, but cash is not yet received from the customer, and the expenses are incurred, but cash is not yet paid.
Accruals are classified into two types. They are accrued revenues, and accrued expenses.
Accrued revenues: Revenues are generated but not yet received in cash.
Accrued expenses: Expenses are incurred but not yet paid in cash.
To indicate: The types of adjustment for the given transactions.
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Accounting, Chapters 1-13
- Which type of adjustment occurs when cash is not collected or paid, but the related income or expense is reportable in the current period? A. accrual B. deferral C. estimate D. cullarrow_forwardIdentify which type of adjustment is associated with this account, and what is the other account in the adjustment? Choose accrued revenue, accrued expense, deferred revenue, or deferred expense. A. accounts receivable B. interest payable C. prepaid insurance D. unearned rentarrow_forwardWhat two accounts are affected by each of these adjustments? A. recorded accrued interest on note payable B. adjusted unearned rent to correct C. recorded depreciation for the year D. adjusted salaries payable to correct E. sold merchandise to customers on accountarrow_forward
- For journal entries 1 through 10, identify the explanation that mostly closely describes it. A. To record this period's depreciation expense. B. To record accrued salaries expense. C. To record this period's use of a prepaid expense. D. To record accrued interest revenue. E. To record accrued interest expense. F. To record the earning of previously unearned income. G. To record cash receipt of unearned revenue. H. To record cash payment of an accrued expense. 1. To record cash receipt of an accrued revenue. J. To record cash payment of a prepaid expense. Explanation Insurance Expense Journal Entries Prepaid Insurance Interest Receivable Interest Revenue Interest Expense Interest Payable Accounts Payable Cash Cash Accounts Receivable (from services) Prepaid Rent Cash Unearned Revenue Services Revenue Cash Unearned Revenue Depreciation Expense Accumulated Depreciation Debit 3,180 3,300 2,208 1,700 12,300 500 19,250 4,200 38,217 Credit 3,180 3,300 2,208 1,700 12,300 500 19,250 4,200…arrow_forwardEntry 4 5 6 7 8 CO 3 2 9 1 10 Explanation Interest Expense Interest Payable Depreciation Expense Accumulated Depreciation Unearned Revenue Services Revenue Insurance Expense Prepaid Insurance Salaries Payable Cash Prepaid Rent Cash Salaries Expense Salaries Payable Interest Receivable Interest Revenue Cash Journal Entries Cash expense. Accounts Receivable (from consulting) Unearned Revenue Cash Debit 1,300 4,400 3,600 3,700 2,000 4,500 5,600 5,400 8,200 7,100 2,200 Credit 1,300 4,400 3,600 3,700 2,000 4,500 5,600 5,400 8,200 7,100arrow_forwardType of Adjustment Classify the following items as (1) prepaid expense, (2) unearned revenue, (3) accrued revenue, or (4) accrued expense: a. Cash received for services not yet rendered b. Insurance paid for the next year c. Interest revenue earned but not received d. Salaries owed but not yet paidarrow_forward
- Which type of adjustment occurs when cash is either collected or paid, but the related income or expense is not reportable in the current period? Group of answer choices 1.accrual 2.deferral 3.estimate 4.cullarrow_forwardWhich of the following are items which are likely to need an accrual adjustment at the year end? Select one: A. Motor vehicles B. Bank O C. Interest received O D. Salesarrow_forwardWhich account would be credited when closing the account for rent expense for the year?A. Prepaid RentB. Rent ExpenseC. Rent RevenueD. Unearned Rent Revenuearrow_forward
- An item that will not be included in the statement of receipts and payments is? A.depreciation B.Rent expense paid C.Inventory purchased by cheque. Membership fees received during the current year for the next yeararrow_forwardFor journal entries 1 through 12, indicate the explanation that most closely describes it. You can use explanations more than once. To record receipt of unearned revenue. To record this period's earning of prior unearned revenue. To record payment of an accrued expense. To record receipt of an accrued revenue. To record an accrued expense. To record an accrued revenue. To record this period's use of a prepaid expense. To record payment of a prepaid expense. To record this period's depreciation expense.arrow_forwardUsing the allowance method, the effect on the current year’s financial statements of writing off an account receivable generally is to a. Decrease total assets.b. Decrease net income.c. Both a. and b.d. Neither a. nor b.arrow_forward
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