FAR 1.8 - Adjusting Journsl Entries Flashcards

1
Q

Cash is received before revenue is earned

A

Unearned (deferred) revenues

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2
Q

Cash is paid before the expense is incurred

A

Prepaid (deferred) expense

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3
Q

Cash is received after the revenue has been earned

A

Accrued revenues (receivables)

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4
Q

Cash is paid after the expense has been incurred

A

Accrued expenses

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5
Q

What are three rules of adjusting journal entries?

A
  1. Must be recorded by the end of the entity’s fiscal year before the preparation of the financial statements
  2. Never involve a cash account
  3. Hit one income statement account and one balance sheet account
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