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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Chapter 3 Solutions
FINANCIAL AND MANAGERIAL ACCOUNTING
- Identify 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_forwardIdentify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense. A. rent paid in advance for use of property B. cash received in advance for future services C. supplies inventory purchased D. fees earned but not yet collectedarrow_forwardWhat adjusting journal entry is needed to record depreciation expense for the period? A. a debit to Depreciation Expense; a credit to Cash B. a debit to Accumulated Depreciation; a credit to Depreciation Expense C. a debit to Depreciation Expense; a credit to Accumulated Depreciation D. a debit to Accumulated Depreciation; a credit to Casharrow_forward
- Identify which type of adjustment is associated with this account, and what the other account is in the adjustment. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense. A. Salaries Payable B. Interest Receivable C. Unearned Fee Revenue D. Prepaid Rentarrow_forwardIf an adjustment includes an entry to a payable or receivable account, which type of adjustment is it? A. accrual B. deferral C. estimate D. cullarrow_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
- If an adjustment includes an entry to Accumulated Depreciation, which type of adjustment is it? A. accrual B. deferral C. estimate D. cullarrow_forwardFor each of the following accounts, identify whether it is nominal/temporary or real/permanent, and whether it is reported on the Balance Sheet or the Income Statement. A. Interest Expense B. Buildings C. Interest Payable D. Unearned Rent Revenuearrow_forwardDeferred revenues represent liabilities recorded when cash is received from customers in advance of providing a good or service. What adjusting journal entry is required at the end of a period to recognize the amount of deferred revenues that were recognized during the period?arrow_forward
- Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR),accrued expenses (AE), or accrued revenues (AR). To record annual depreciation expense.arrow_forwardRent paid in advance can be categorized as a. Deferred expense (Prepaid expense) b. Accrued revenue c. Deferred revenue (Unearned revenue) d. Accrued expensearrow_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
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College