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13 Cards in this Set
- Front
- Back
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What are the two classes of adjusting entries?
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1) Deferred Items
2) Accrued Items |
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What are the two types of entries for deferred adjustments?
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1) Asset/Expense adjustments
2) Liability/Revenue adjustments |
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What are the two types of entries for accrued adjustments?
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1) Asset/Revenue adjustments
2) Liability/Expense adjustments |
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Prepaid Expense
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An asset awaiting assignment to expense.
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What accounts receive Asset/Expense adjustments
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Prepaid expenses and depreciation.
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What is the purpose of a contra asset account?
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To reduce the original cost of the asset down to its remaining undepreciated cost or book value.
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Book Value
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The unused cost of an asset awaiting assignment to an expense.
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What accounts receive Liability/Revenue adjustments
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Unearned revenues.
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What accounts receive Asset/Revenue adjustments
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Accrued assets.
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Effect of Failure to Recognize:
Consumption of an asset |
Effect on I/S: Overstates NI
Effect on B/S: Overstates Assets & Overstates R/E |
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Effect of Failure to Recognize:
Earning of previously unearned revenues |
Effect on I/S: Understates NI
Effect on B/S: Overstates Liab. & understates R/E |
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Effect of Failure to Recognize:
Accrual of Assets |
Effect on I/S: Understates NI
Effect on B/S: Understates Assets & understates R/E |
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Effect of Failure to Recognize:
Accrual of Liabilities |
Effect on I/S: Overstates NI
Effect on B/S: Understates Liab. & overstates R/E |
