Explanation Prepaid expense: Advance payment for future expenses is called as prepaid expenses. These prepaid expenses are considered as assets until they are expensed or used. For the portion of used assets, expenses would be recognized by way of passing an adjusting entry. Prepaid expenses are also known as deferred expenses, because at the time of making payment, expenses are not recognized but deferred until they are used up. Unearned revenue: Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned. Accrued expenses: Accrued expenses are the expenses that have been incurred but have not been paid yet. These accrued expenses create accrued liabilities. For the portion of payment made, accrued liabilities would be reduced by way of passing an adjusting entry...

15th Edition

ISBN: 9781337912143

Author: WARREN

Publisher: Cengage

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Chapter 3, Problem 2BE

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Indicate the types of adjustment for the given transactions.

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Chapter 3 Solutions

Financial And Managerial Accounting

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Indicate the types of adjustment for the given transactions.

Solution Summary: The author explains the types of adjustments for the given transactions.

Indicate the types of adjustment for the given transactions.

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