For the following situations, indicate whether each involves a deferred expense (DE), a deferred
revenue (DR), an accrued liability (AL), or an accrued asset (AA).
Example: DE Office supplies purchased in advance of their use
__________ 1. Wages earned by employees but not yet paid
__________ 2. Cash collected from subscriptions in advance of publishing a magazine
__________ 3. Interest earned on a customer loan for which principal and interest have not yet
been collected
__________ 4. One year’s premium on life insurance policy paid in advance
__________ 5. Office building purchased for cash
__________ 6. Rent collected in advance from a tenant
__________ 7. State income taxes owed at the end of the year
__________ 8. Rent owed by a tenant but not yet collected
Determine whether recording each of the following adjustments will increase (I), decrease (D),
or have no effect (NE) on each of the three elements of the accounting equation.
Assets = Liabilities + Stock. Equity
Example: Wages earned during the period but not yet paid
are accrued. NE I D
1. Prepaid insurance is reduced for the portion of the policy
that has expired during the period. ________ ________ ________
2. Interest incurred during the period but not yet paid is accrued. ________ ________ ________
3. Depreciation for the period is recorded. ________ ________ ________
4. Revenue is recorded for the earned portion of a liability for
amounts collected in advance from customers. ________ ________ ________
5. Rent revenue is recorded for amounts owed by a tenant
but not yet received. ________ ________ ________
6. Income taxes owed but not yet paid are accrued. ________ ________ ________
The steps in the accounting cycle are listed in random order. Fill in the blank next to each step to
indicate its order in the cycle. The first step in the cycle is filled in as an example.
Order Procedure
________ Prepare a work sheet.
________ Close the accounts.
1 Collect and analyze information from source documents.
________ Prepare financial statements.
________ Post transactions to accounts in the ledger.
________ Record and post adjustments.
________ Journalize daily transactions.
0 comments