If an expense has been incurred but not yet recorded, the adjusting entry would involve: a. A liability and an asset b. liability and a revenue c. An expense and an asset d. An asset and a revenue
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
If an expense has been incurred but not yet recorded, the
a. A liability and an asset
b. liability and a revenue
c. An expense and an asset
d. An asset and a revenue
Which statement is not true about accrual and deferral?
a. An accrued expense is an amount not paid and currently matched with earnings.
b. A prepaid expense is an amount paid and not currently matched with earnings.
c. An accrued income is an amount not collected and currently matched with expenses.
d. A deferred income is an amount collected and currently matched with expenses.
An entity is a resort located in Palawan. The entity collects cash when guests make a reservation. During December 2020, the entity collected P600,000 of cash and recorded the receipt by recognizing unearned revenue. The entity had earned one-third of this amount and the other two-thirds will be earned during January 2021. What is the impact of the adjusting entry on December 31, 2020?
a. 400,000 increase in equity
b. 200,000 decrease in liability
c. 600,000 increase in asset
d. 200,000 decrease in equity
An entity is a resort located in Boracay. During December 2020, PICPA held an annual conference at the resort. The charges related to the conference totaled P4,000,000, of which 25% had been paid. The entity failed to make the appropriate adjusting entry on December 31, 2020 for the uncollected balance. Which of the following statements is true?
a. Equity is overstated by P3,000,000
b. Equity is understated by P1,000,000
c. Assets are understated by P3,000,000
d. Assets are overstated by P1,000,000
During the first year of operations, an entity recorded all purchases of supplies as assets. Supplies in the amount of P2,000,000 were purchased. Actual year-end supplies unused amounted to P500,000. What is the impact of the adjusting entry on supplies?
a. Increase in net income P1,500,000
b. Increase in expenses P1,500,000
c. Decrease in assets P500,000
d. Decrease in expenses P500,000
An entity reported prepaid supplies at the beginning of the year with a balance of P400,000 before the reversing entry. Payments for supplies during the year amounted to P2,500,000 and were recorded as expense. A physical count at the end of the year revealed supplies unused costing P500,000. Reversing entries are made by the entity. What is the adjusting entry at year-end?
a. Debit Prepaid Supplies and credit Supplies Expense P100,000
b. Debit Supplies Expense and credit Prepaid Supplies P100,000
c. Debit Supplies Expense and credit Prepaid Supplies P2,400,000
d. Debit Prepaid Supplies and credit Supplies Expense P500,000
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