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 Fundamentals of Financial Management, Concise Edition10th EditionEugene F. Brigham, Joel Houston 777 solutions
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Century 21 Accounting: General Journal11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman 1,012 solutions Prepaid Expenses: are expenses paid in cash before they are used or consumed. When expenses are prepaid, an asset account is increased (debited) to show the service or benefit that the company will receive in the future. an adjusting entry for prepaid expenses results in an increase (a debit) to an expense account and a decrease (a credit) to an asset account Supplies: The purchase of supplies, such as paper and envelopes, results in an increase (a debit) to an asset account. During the accounting period, the company uses supplies. Rather than record supplies expense as the supplies are used, companies recognize supplies expense at the end of the accounting period. At the end of the accounting period, the company counts the remaining supplies. The difference between the unadjusted balance in the Supplies (asset) account and the actual cost of supplies on hand represents the supplies used (an expense) for that period. Insurance: Companies purchase insurance to protect themselves from losses due to fire, theft, and unforeseen events. Insurance must be paid in advance, often for more than one year. The cost of insurance (premiums) paid in advance is recorded as an increase (debit) in the asset account Prepaid Insurance. At the financial statement date, companies increase (debit) Insurance Expense and decrease (credit) Prepaid Insurance for the cost of insurance that has expired during the period. Depreciation: A company typically owns a variety of assets that have long lives, such as buildings, equipment, and motor vehicles. The period of service is referred to as the useful life of the asset. Because a building is expected to provide service for many years, it is recorded as an asset, rather than an expense, on the date it is acquired. To follow the expense recognition principle, companies allocate a portion of this cost as an expense during each period of the asset's useful life. Depreciation is the process of allocating the cost of an asset to expense over its useful life. Unearned Revenues: Companies record cash received before services are performed by increasing (crediting) a liability account called unearned revenues. In other words, the company has a performance obligation to transfer a service to one of its customer. the adjusting entry for unearned revenues results in a decrease (a debit) to a liability account and an increase (a credit) to a revenue account. Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be Supplies Expense $1,300 Supplies Expense $3,700 Supplies $3,700 Supplies $1,300 Students also viewedRecommended textbook solutions
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How are revenues and expenses recognized under the accrual basis of accounting chegg?Accrual Basis Of Accounting Definition
The accrual basis of accounting refers to the recognition of revenue and expense at the point they are earned or incurred rather than when the cash for such revenues and expenses is received or paid.
Are expenses recognized on the basis of accrual and matching?Expense recognition is a key component of accrual accounting
Part of the matching principle, the expense recognition principle states that expenses should be recognized in the same period as the related revenue. If expenses are recognized when they are paid, you are using cash basis accounting.
When revenue is recognized when earned and expenses are recorded when incurred which basis of accounting is being used?17. Under the accrual basis of accounting, revenues are recognized when earned, and expenses are recorded when incurred. WHY DOES IT MATTER? Accrual accounting matters because it presents a more accurate picture of a company's financial condition.
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How are revenues and expenses recognized under the accrual basis of accounting quizlet?
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