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Chapter 3: Q. 3-8RQ (page 157)

What are the two basic categories of adjusting entries? Provide two examples of each.

Short Answer

Expert verified

Accrued revenues and accrued expenses. Accrued revenues includes Accrued service revenue and Accrued interest revenue. Accrued expense includes accrued interest expense and Accrued salaries.

Step by step solution

01

Explanation on Accrued Revenues

Accrued revenues refers to the revenues which earned but cash has not been received for the same.

Accrued service revenue indicates the revenue in which services has been provided but cash has not been received.

Accrued interest revenue indicates the revenue earned by way of interest and cash has not been received for the same.

02

Explanation on Accrued Expenses

Accrued expenses indicates the expenses that are incurred during the period, but remains unpaid.

Accrued salaries expense refers to the amount owed to the employees of the business, which are unpaid.

Accrued interest expense refers to the interest expenses that are incurred and will be paid later to the creditors.

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Most popular questions from this chapter

If an accrued expense is not recorded at the end of the year, what is the impact on the financial statements?

What is a fiscal year? Why might companies choose to use a fiscal year that is not a calendar year?

Under the revenue recognition principle, when is revenue recorded?

Eastside Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements 1. Record the journal entry to record the original receipt of \(180,000 cash. 2. Record the adjusting entry that Eastside Magazine makes to record earning \)8,000 in subscription revenue that was collected in advance. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances after adjustments. (Ignore the Cash account.)

Question :The unadjusted trial balance for All Mopped Up Company, a cleaning service, is as follows:ALL MOPPED UP COMPANY Unadjusted Trial Balance December 31, 2018 Account Title Prepaid Insurance Cash Debit Credit Office Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Common Stock Dividends Service Revenue Salaries Expense Supplies Expense Depreciation Expense—Equipment Insurance Expense Total Balance \( 800 \) 45,400 \( 45,400 \) 2,000 15,300 25,000 2,000 600 30,000 2,400 700 5,000 7,000 A, During the 12 months ended December 31, 2018, All Mopped Up: a. used office supplies of \(1,700. b. used prepaid insurance of \)580. c. depreciated equipment, \(500. d. accrued salaries expense of \)310 that hasn’t been paid yet. e. earned $400 of unearned revenue. Requirements 1. Open a T-account for each account using the unadjusted balances. 2. Journalize the adjusting entries using the letter and December 31 date in the date column. 3. Post the adjustments to the T-accounts, entering each adjustment by letter. Show each account’s adjusted balance.
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