FAR 1.8 - Adjusting Journsl Entries Flashcards
1
Q
Cash is received before revenue is earned
A
Unearned (deferred) revenues
2
Q
Cash is paid before the expense is incurred
A
Prepaid (deferred) expense
3
Q
Cash is received after the revenue has been earned
A
Accrued revenues (receivables)
4
Q
Cash is paid after the expense has been incurred
A
Accrued expenses
5
Q
What are three rules of adjusting journal entries?
A
- Must be recorded by the end of the entity’s fiscal year before the preparation of the financial statements
- Never involve a cash account
- Hit one income statement account and one balance sheet account