Accruals and Pre-payments Adjusting Entries

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What is the purpose of an adjusted trial balance?

To prove that total debit and credit balances are equal after adjusting entries

In the context of financial statements preparation, what follows the adjusted trial balance?

Income Statement

What account would typically be debited when recognizing accrued revenues?

Revenue

Which account is credited when recognizing unearned revenue?

Revenue

When preparing the financial statements, the adjusted trial balance is used to calculate the ________.

Net income

Which principle requires the preparation of Adjusting Entries in accounting?

Revenue recognition principle

In accrual basis accounting, when are revenues recognized?

When services are performed or goods are sold and delivered

Which accounting concept states that expenses should be recognized in the same period as the related revenue is earned?

Matching concept

What is the purpose of preparing adjusting entries for prepayments in accrual accounting?

To recognize expenses incurred but not yet paid

How are long-lived assets typically expensed in accounting?

Over the useful life of the asset

Which concept divides the economic life of a business into time periods in accounting?

Periodicity concept

What is the purpose of adjusting entries for accruals?

To record revenue or expenses that have occurred but not yet been recorded

Which of the following best describes accrued revenues?

Revenues that have been earned but not yet recorded or received in cash

In an adjusting entry for accrued expenses, what accounts are typically affected?

Liability and expense accounts

What would be the journal entry to record an accrued revenue?

Dr. Accounts Receivable, Cr. Revenue

Accrued expenses are best described as:

Expenses that have been incurred but not yet paid or recorded

Why are adjusting entries important in accrual accounting?

To align reported revenues and expenses with their actual occurrence

Learn about adjusting entries for accruals and pre-payments, including the concepts of accrued revenues and expenses. Understand how to record revenue or expenses that have occurred but have not been recorded in the accounting books yet.

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