Accounting Quiz 4: Adjustment Process

Expenses paid in advance, initially recorded as assets, later converted to expenses as used.

Cash received in advance for services not yet performed, initially recorded as a liability, later converted to revenue upon performance.

Cost of supplies consumed during a period and converted to an expense.

Allocation of the cost of long-term assets to expense over their useful lives.

Expenses incurred but invoices haven't arrived or been paid.

Entry made at the end of the period to update the supplies account and recognize the supplies used.

Entry made at the end of the period to update the prepaid rent account and recognize the rent expense.

Entry made at the end of the period to update the prepaid insurance account and recognize the insurance expense.

Ensuring financial statements are accurate, current, and consistent by bringing accounts up-to-date, considering late transactions, and following accounting principles.

The idea that a business's economic activity can be divided into specific accounting periods (like months or years) for financial reporting.

The one-year accounting period used in financial statements.

Revenue should be recorded when it's earned, not when cash is received.

Expenses are recorded in the same period as related revenues.

Records revenue when earned and expenses when incurred, not necessarily when cash changes hands.

Journal entries required to update accounts at the end of an accounting period to align with accounting principles.

Recognizing the cost of supplies used during a period, even if cash hasn't changed hands.

Cash received in advance for future services or goods.

Recognize revenue when earned, not when cash received.

Entry to convert unearned revenue to revenue when earned.

Allocating the cost of a long-term asset over its useful life.

Cost of supplies used during a period.

Updates supplies account and records expense.

Expenses paid in advance, asset initially.

Converts prepaid expense into expense.

Distributing the cost of a long-term asset over its useful life.

Expenses are recorded in the same period as the related revenue.

Entries made at the end of an accounting period to ensure financial statements align with accounting principles.

Method to depreciate an asset by equally distributing its cost over its useful life.

Journal entries that transfer balances from temporary accounts to permanent accounts at the end of an accounting period.

Revenue is recognized when it's earned, not necessarily when cash is received.

Financial statement showing a company's assets, liabilities, and equity at a specific point in time.

The value of an asset on the balance sheet after deducting accumulated depreciation.

Journal entry recording the expense of using a long-term asset over a period. It debits depreciation expense and credits accumulated depreciation.

Accounting principle that matches revenues with expenses incurred to earn those revenues, even if not paid yet.

Net income reflects profit after deducting expenses from revenues; cash balance shows readily available liquid assets. These often differ due to timing differences and the matching principle.

Journal entries made at the end of a period to ensure expenses are matched with revenues and accounts reflect accurate financial position.

Expense recognized for the use of a long-term asset over a period.

The total depreciation expense accumulated over the life of an asset.

Temporary accounts (revenue, expense, dividends) that are zeroed out at the end of the accounting period.

Recognizes the cost of supplies used during a period (Adjusting Entry).

The purchase of a policy for protection against risks for a specified amount of time.

Adjusts the prepaid insurance account to reflect the portion of insurance used up in the current period.

Cash received in advance for services/products to be provided at a later date.

Part of the Unearned Revenue is converted to Revenue on completion of partial work.

Allocating the cost of the furniture to expense over its useful life.