wk1 Accounting for Accruals and Deferrals

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National University College *

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600

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Accounting

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Feb 20, 2024

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Companies recognize revenue before the cash has been collected when using ______ accounting. accrual Issuing stock for cash increases ______. Correct Answer  common stock  stockholders' equity  assets  cash flow from financing activities Recognizing revenue on account affects the ______. Correct Answer  income statement  statement of changes in stockholders equity  balance sheet When a company incurs a cash expense, the balance in the cash account: Correct Answer decreases and the balance in the expense account increases. An accrued expense is the recognition of an expense before Blank 1 Blank 1 before , Correct Unavailable (before/after) cash is paid. (Enter either before or after.) Correct Answer  Blank 1: before

Revenue is recognized when it is earned and expenses when they are incurred, regardless of when cash changes hands when using accrual Blank 1 Blank 1 accrual , Correct Unavailable accounting. ( Enter only one word per blank.) Correct Answer  Blank 1: Accrual or accrual Recognizing revenue on account affects financial statements by increasing ______. Correct Answer  accounts receivable  revenue  net income Acquiring cash from the issue of common stock ______. Correct Answer does not affect the income statement Recognizing revenue on account affects the financial statements by increasing ______. Correct Answer  revenue  retained earnings  accounts receivable Which of the following are reported on the income statement? Correct Answer

 Salary expense  Net income When a company incurs a cash expense, the balance in the retained earnings account: Correct Answer decreases. An expense is ______. Correct Answer an economic sacrifice resulting from operating activities undertaken to generate revenue Expenses that are recognized before cash is paid are called accural Blank 1 Blank 1 accural , Incorrect Unavailable expenses. (Enter only one word per blank.) Correct Answer  Blank 1: accrued or accrual When a company collects an account receivable, the amount of ______. Correct Answer  cash increases  accounts receivable decreases  revenue is not affected A change in stockholders' equity is caused by ______. Correct Answer  issuing stock

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 earnings  incurring a cash expense Issuing stock for cash increases ______. Correct Answer  stockholders' equity  assets  cash flow from financing activities  common stock Which of the following are reported on the income statement? Correct Answer  Advertising expense  Consulting revenue Assets, liabilities and stockholders' equity at a particular point in time are reported on the Balance Blank 1 Blank 1 Balance , Correct Unavailable Sheet Blank 2 Blank 2 Sheet , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: balance  Blank 2: sheet An economic sacrifice resulting from operating activities undertaken to generate revenue is called a(n) expense Blank 1 Blank 1 expense , Correct Unavailable. (Enter only one word per blank.)

Correct Answer  Blank 1: expense The statement of cash flows ______. Correct Answer explains the change in cash from the beginning to the end of the accounting period An accrued expense is the recognition of an expense before Blank 1 Blank 1 before , Correct Unavailable (before/after) cash is paid. (Enter either before or after.) Correct Answer  Blank 1: before During Year 1, Silver Sinks, Inc. earned $33,000 of revenue on account. Cash collections of receivables were $28,000. The remainder of the receivables were collected in Year 2. As a result of these transactions, Silver Sink will report Year 1 net income of: Correct Answer $33,000 and cash inflow from operating activities of $28,000 in Year 1 and $5,000 in Year 2. Issuing stock in exchange for cash will: Correct Answer

 be reported on the statement of cash flows.  increase stockholders' equity. Acquiring cash from the issue of common stock ______. Correct Answer does not affect the income statement After the closing process is complete, which of the following accounts will have a zero balance? Correct Answer  Salaries Expense  Service Revenue An entity's assets, liabilities and stockholders' equity are disclosed on the ______. Correct Answer balance sheet Chambers Inc. recognizes all expenses in the same period the revenue is recognized, regardless of when cash changes hands. This is known as the accrual Blank 1 Blank 1 accrual , Incorrect Unavailable_ concept. Correct Answer  Blank 1: matching The change in cash is explained by the ______.

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Correct Answer statement of cash flows True or false: A company recognized an accrued salary expense in Year 1 and paid its employees in Year 2. In Year 2 neither Salaries expense nor Salaries payable will change as a result of this transaction. Correct Answer False Grey Company earned $5,000 of revenue on account during Year 1, but collected the cash associated with the receivables in Year 2. Based on this information alone, under accrual accounting, the company will report: Correct Answer  net income of zero and cash inflow from operations of $5,000 in Year 2.  net income of $5,000 and cash inflow from operations of zero in Year 1. The purchase of supplies on account is a(n) ______ transaction. Correct Answer asset source A change in stockholders' equity is caused by ______. Correct Answer  incurring a cash expense  issuing stock  earnings When the Salaries Expense account is closed: Correct Answer

 retained earnings decreases.  salaries expense decreases. Coffee Company had a $500 beginning balance in its supplies account. The company purchased $2,000 of supplies during the accounting period. A physical count of supplies determined that $400 of supplies were on hand at the end of the accounting period. The amount of supplies expense to be recognized is: Correct Answer $2,100. Coffee Company had a $500 beginning balance in its supplies account. The company purchased $2,000 of supplies during the accounting period. A physical count of supplies determined that $400 of supplies were on hand at the end of the accounting period. The amount of supplies expense to be recognized is: Correct Answer $2,100. The Unearned Revenue account is shown in the ______. Correct Answer liabilities section of the balance sheet True or false: The balance sheet must be prepared before the statement of changes in stockholders' equity. Correct Answer False Which of the following describes the matching concept? Correct Answer

Expenses should be matched with the revenue they produce. A company recognized an accrued salary expense in Year 1 and paid its employees in Year 2. In Year 2 ______. Correct Answer  salaries payable will decrease  cash will decrease  salaries expense will not be affected True or false: The purchase of supplies on account impacts both the balance sheet and income statement. Correct Answer False Issuing stock in exchange for cash will: Correct Answer  be reported on the statement of cash flows.  increase stockholders' equity. Coffee Company had a $500 beginning balance in its supplies account. The company purchased $2,000 of supplies during the accounting period. A physical count of supplies determined that $400 of supplies were on hand at the end of the accounting period. The amount of supplies available for use during the accounting period was: Correct Answer $2,500. The Prepaid Rent account is shown in the ______ section of the balance sheet. Correct Answer

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assets True or false: A company recognized an accrued salary expense in Year 1 and paid its employees in Year 2. In Year 2 neither Salaries expense nor Salaries payable will change as a result of this transaction. Correct Answer False On August 1 of Year 1, a company paid $1,200 cash in exchange for an insurance policy that protects the company from loss due to fire for a one year term. Based solely on this information, how will the December 31, Year 1 financial statements be affected? Correct Answer  The balance sheet will show $700 of prepaid insurance.  The statement of cash flows will show $1,200 outflow from operating activities.  The income statement will show $500 of insurance expense. The statement of changes in stockholders' equity reports ______. Correct Answer  issuing common stock  earning net income  paying dividends Purchasing prepaid rent has no effect on ______. Correct Answer  total assets  the income statement

On June 1 of Year 1, a company paid $2,400 cash to rent office space for one year beginning immediately. Based solely on this information, how would this transaction affect the Year 2 financial statements? Assume that the company's accounting year is the same as the calendar year. (Select all that apply.) Correct Answer  The income statement would show $1,000 of rent expense.  The statement of cash flows would not be affected. True or false: The purchase of supplies on account impacts both the balance sheet and income statement. Correct Answer False Recognizing an accrued expense is a(n) ______ transaction. Correct Answer claims exchange On September 1 of Year 1, a law firm collected cash for services to be provided in Year 2. Based on this information, how would the recognition of earned revenue affect the Year 2 income statement and statement of cash flows? Correct Answer Net income will increase and cash flows will not be affected. On September 1 of Year 1, a law firm collected cash for services to be provided in Year 2. Based on this information, how will the recognition of earned revenue affect the Year 2 balance sheet? Correct Answer

Liabilities will decrease and equity will increase. On September 1 of Year 1, an accountant collected $2,400 cash in exchange for an agreement to provide consulting services for one year beginning immediately. Assuming a December 31 year end, how will the Year 2 financial statement be affected? Correct Answer  The statement of cash flows would show zero inflow from operating activities.  The income statement will show $1,600 of earned revenue.  The balance sheet will show a zero balance in the Unearned Revenue account. Unearned revenue appears on the ______. Correct Answer balance sheet The amount of net income for the year can be directly traced to the ______. Correct Answer statement of changes in stockholders' equity Purchasing prepaid rent is a(n) ______ transaction. Correct Answer asset exchange On August 1 of Year 2, a company paid cash to purchase prepaid rent. The December 31st adjusting entry will ______.

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Correct Answer decrease assets, net income and stockholders' equity An asset account and a claims account decreases in a(n) ______ transaction. Correct Answer asset use Providing services on account is a(n) ______ transaction. Correct Answer asset source