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Accounts Adjustments

Financial Accounts and Adjustments

TermDefinition
Time Period Assumption that states that the economic life of a business can be divided into artificial time periods
Accrual Basis of accounting that is in accord with the GAAP, and states that the economic events of a company should be recorded in periods in which they occurred. Also Revenue is recognized in the period in which the service was performed.
Expense Recognition Principle or assumption dictating that efforts (expenses) be matched with accomplishments (revenues).
Adjusting entries are made to ensure that: 1. Expenses are recognized in the time period in which they are incurred. 2. Revenues are recorded in the period in which services are provided. 3.The Balance Sheet & Income Statement accounts have a correct balance at the end of the period.
Prepaid Expense Assets paid in cash and recovered before a company use them.
Unearned Revenues Cash received before a company earns revenues and recorded as a liability until earned.
Accrued Expense Expenses incurred but not yet paid in cash or recorded.
Accrued Revenues Revenues earned but not yet received in cash or recorded. Prepaid Expense
Revenues earned but not yet received in cash or recorded. Prepaid Expense Before the adjustment, this transaction has: Overstated ASSETS & Understated EXPENSES
Unearned Revenues Before the adjustment, this transaction has: Overstated LIABILITIES & Understated REVENUES
Accrued Expense Before the adjustment, this transaction has: Understated LIABILITIES & Understated EXPENSE
Accrued Revenues Before the adjustment, this transaction has: Understated ASSETS & Understated REVENUES
Prepaid Expense To adjust this entry we must: Debit: EXPENSES (increase) Credit: ASSETS (decrease)
Unearned Revenues To adjust this entry we must: Debit: LIABILITIES (decrease) Credit: REVENUES (increase)
Accrued Expense To adjust this entry we must: Debit: EXPENSES Credit: LIABILITIES
Accrued Revenues To adjust this entry we must: Debit: ASSETS Credit: REVENUES
What is debited and credited to adjust the following: Pegasus borrowed R20,000 from a local bank on a 10-year note. The annual interest rate is 9% Interest expense, interest payable
What is debited and credited to adjust the following: Pegasus owed employees R1,300 in salaries that the company will pay in August. salaries and wages expense, salaries and wages payable
What is debited and credited to adjust the following: Salaries earned by employees of R900 have not been recorded salaries and wages expense, salaries and wages payable
What is debited and credited to adjust the following: Interest on notes payable of R360 is accrued. interest expense, interest payable
What is debited and credited to adjust the following: Services provided but not recorded total R1,750. accounts receivable, service revenue
What is debited and credited to adjust the following: The equipment depreciates R200 per month. Depreciation expense, accumulated depreciation
What is debited and credited to adjust the following: 2/5 of the unearned service revenue was recognized in March. unearned service revenue, service revenue