Chapter 4: Adjustments, Financial Statements, and Financial Results

__________ record daily transactions.

For _________, cash is NEVER involved.

Adjustments are made at the end of the __________.

Adjusting entries always have _____ balance sheet account and _____ income statement account.

The purpose of adjustments at the end of the period is to state the following at appropriate amounts:

There are _____ categories for adjustments.

Deferral adjustments arise because a cash transaction happened _____.

Deferral adjustments:

One asset and one expense account: An asset from the balance sheet moves to the income statement as an expense (prepaid rent turns into rent expense).

One liability and one revenue account: A liability called deferred revenue is reported on the balance sheet. Once liability service or sale is provided, it moves onto the income statement as "sales" or "service" revenue.

________ are needed when a company has earned revenue or incurred an expense in the current period but has not recorded it because cash will be paid later.

Accrual adjustments arise because a cash transaction happened _____.

_____ is NEVER involved in an accrual adjustment because cash is paid after.

One liability and one expense account: A liability called a payable (to pay later) is reported on the balance sheet. Once paid, it moves to the income statement as an expense. (interest payable turns into interest expense).

One asset and one revenue account: An asset is reported on the balance sheet as a receivable (to collect later). Once collected, it is moved to the income statement as a revenue. (rent receivable turns into rent revenue).

For deferral accounts,

For accrual adjustments,

________ is the process of allocating the cost of buildings, vehicles, and equipment (tangible assets) to the accounting periods in which they are used.

The ________ says that when equipment is used to generate revenue, part of the cost is becomes an expense.

__________ is found on the income statement and records the cost of equipment at the time.

__________ is found on the balance sheet and it is a contra account used to reduce value of equipment.

The journal entry for depreciation:

A _________ is an account that is a reduction of another account.

A contra account must

A contra account's normal balance is

________ is the corollary to depreciation and relates to intangible assets (advertisements, patents, logos).

The Amortization Expense account is found on the __________.

__________ is on the balance sheet, brings the value down for assets, and has a normal credit balance.

________ are made at the end of the accounting period. They show that revenues (earned) and expenses (incurred) are reported properly.

The __________ ensures that debits still equal credits.

__________ are transferred into debit and credit columns.

_______ liabilities and _______ assets should be labeled on the balance sheet.

The __________ is done at the end of the year.

__________ are tracked for a limited period of time and are closed at the end of the year. This includes revenues, expenses, and dividends.

_________ are not closed at the end of the year and are carried into the next year. This includes assets, liabilities, and stockholders' equity.

__________ for the end of the year becomes the beginning balance for next year.

Journal entry #1 for closing accounts

Journal entry #2 for closing accounts

________ are the last step in the accounting process and will ensure all income statement accounts and the dividend account have a zero balance.

Only __________ accounts are found on the post closing trial balance.

If there were no adjustments, the company's performance would have an ________.