ACCT CHP 2

prepaid expense

expenses paid in cash bfore they are used or consumed

unearned revenue

cash received before services are performed

accrued revenues

revenues that are earned but not yet recorded at thev statement date

accrued expenses

expenses that are incurred but not yet paid in cash

deferrals

expenses or revenues that are recognized at a date later than the point when cash was originally exchanged

6,000 for one yr of insurance debit - credit -

debit pre paid insurance credit insurance expense

purchased 25k supplies after 1 month 10k on hand debit ? credit?

debit supplies exp 15k credit supplies 15k

adjusting entries

ensure that a company follows the revenue recognition and expense recognition principals

trial balance

before adj entries; is list of accounts and their balances at a given time

Issued 12,000 shares of common stock for $12,000 cash.

cash D 12k CM C 12K

Purchased used truck for $8,000, paying $2,000 cash and the balance on account.

Equip. D 8K AP 6K C Cash 2K C

Purchased cleaning supplies for $900 on account.

Supplies 900 D AP 900 C

Paid $1,800 cash on a 1-year insurance policy effective July 1.

pre. insurance 1.8K D Cash 1.8K C

Billed customers $3,700 for cleaning services performed.

AR 3.7K D servie revenue 3.7K C

Paid $1,000 cash on amount owed on truck and $500 on amount owed on cleaning supplies.

AP 1.5K D Cash 1.5K C

Paid $2,000 cash for employee salaries.

Salaries/ Wages payable 2k D Cash 2K C

Collected $1,600 cash from customers billed on July 12.

Cash 1.6K D AR 1.6K C

Billed customers $2,500 for cleaning services performed.

AR 2.5K D Servie Revenue 2.5K C

Paid $290 for maintenance of the truck during month.

Maintanence Repair Exp 290 D Cash 290 C

Declared and paid $600 cash dividend.

Dividends 600 D Cash 600 C

depreciation

process of expensing (allocating) the cost of an asset over its useful life in a rational and systematic manner.

contra asset account

offsets an asset account on the balance sheet

book value

difference between cost and its related accumulated depreciation

unearned revenue

receiving cash before services are performed (crediting liability account unearned revenue) opposite of prepaid expenses

accruals

record revneues for services performed and expenses incurred in the current acct period

adjusting entries for accruals will …

increase both a balance sheet and an income statement account

accrued revenues D… C…

Debit assets and Credit revenue accounts in adjusting entries

Accrued Expenses D…. C…

Debit expense Credit Liability accounts in adjusting entries