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Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
Chapter 3, Problem 5DQ
Textbook Problem
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Identify the four different categories of adjusting entries frequently required at the end of an accounting period.

To determine

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

Types of adjusting entries:

There are two types of adjusting entries, they are:

  • Accruals and,
  • Deferrals.

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.

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.

To identify: The four different categories which require adjusting entries at the end of the period, frequently.

Explanation of Solution

  1. 1. Prepaid expenses:  The prepaid expenses are those expenses which are paid in advance, before they are incurred. These are treated as asset for the business.
  2. 2. Unearned revenue:  Unearned revenue is the revenue which is earned in advance, ahead of goods supplied or services performed. As per the revenue recognition principle it is not recorded in the books of accounts until earned. Hence, this is considered as a liability for the business...

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Chapter 3 Solutions

Accounting
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Ch. 3 - Accounts requiring adjustment Indicate with a Yes...Ch. 3 - Accounts requiring adjustment Indicate with a Yes...Ch. 3 - Type of adjustment Classify the following items as...Ch. 3 - Type of adjustment Classify the following items as...Ch. 3 - Adjustment for accrued revenues At the end of the...Ch. 3 - Adjustment for accrued expense Prospect Realty Co....Ch. 3 - Adjustment for accrued expense We-Sell Realty Co....Ch. 3 - Adjustment for unearned revenue On June 1, 2019,...Ch. 3 - Adjustment for unearned revenue The balance in the...Ch. 3 - Adjustment for prepaid expense The prepaid...Ch. 3 - Adjustment for prepaid expense The supplies...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Vertical analysis Two income statements for...Ch. 3 - Vertical analysis Two income statements for Cornea...Ch. 3 - Classifying types of adjustments Classify the...Ch. 3 - Classifying adjusting entries The following...Ch. 3 - Adjusting entry for accrued fees At the end of the...Ch. 3 - Effect of omitting adjusting entry The adjusting...Ch. 3 - Adjusting entries for accrued salaries Garcia...Ch. 3 - Determining wages paid The wages payable and wages...Ch. 3 - Effect of omitting adjusting entry Accrued...Ch. 3 - Effect of omitting adjusting entry When preparing...Ch. 3 - Adjusting entries for unearned fees The balance in...Ch. 3 - Effect of omitting adjusting entry At the end of...Ch. 3 - Adjusting entry for supplies The balance in the...Ch. 3 - Determining supplies purchased The supplies and...Ch. 3 - Effect of omitting adjusting entry At August 31,...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for unearned and accrued fees...Ch. 3 - Adjusting entries for prepaid and accrued taxes...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Determining fixed asset's book value The balance...Ch. 3 - Book value of fixed assets In a recent balance...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements The...Ch. 3 - Effects of errors on financial statements If the...Ch. 3 - Adjusting entries for depreciation; effect of...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Vertical analysis Amazon.com, Inc. is the largest...Ch. 3 - Vertical analysis The following data are taken...Ch. 3 - Vertical analysis The following income statement...Ch. 3 - Adjusting entries On December 31, the following...Ch. 3 - Adjusting entries Selected account balances before...Ch. 3 - Adjusting entries Milbank Repairs Service, an...Ch. 3 - Adjusting entries Good Note Company specializes in...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of April,...Ch. 3 - Adjusting entries On May 31, the following data...Ch. 3 - Adjusting entries Selected account balances before...Ch. 3 - Adjusting entries Crazy Mountain Outfitters Co.,...Ch. 3 - Adjusting entries The Signage Company specializes...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of August,...Ch. 3 - The unadjusted trial balance that you prepared for...Ch. 3 - Ethics in Action Chris P. Bacon is the chief...Ch. 3 - Ethics in Action Daryl Kirby opened Squid Realty...Ch. 3 - Communication Delta Air Lines is a major passenger...Ch. 3 - Adjustments and financial statements Several years...

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