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It is the process of formally recording or incorporating an expense or revenue into the accounting system.

Revenues are recognized when cash is received, and expenses are recognized when cash is paid.

Expenses are recognized so that they “match” the revenues they produced.

Requires deferrals and accruals of certain transactions.

A boat is being built.

A landlord receives rent for the following year in advance.

A company sends a potential customer an unordered magazine.

A company provides landscaping services during December, but receives payment in January.

The revenue transaction occurs in the period prior to the period in which the cash transaction occurs.

The expense transaction occurs in the period after the period in which the cash transaction occurs.

The cash transaction occurs in the period before the period in which the revenue transaction occurs.

Revenue recognition is postponed to a subsequent period.

Either expenses are debited or revenues are credited.

Either assets are credited or liabilities are debited.

Either revenues are debited or expenses are credited.

Either assets are debited or expenses are debited.

Question 5

For ABC Co., $6,500 in wages for the last week of the accounting period will not be paid to employees until the next period. ABC is a public company and must accrue its expenses in the period they are incurred. What is the correct adjusting entry to accrue the current period’s wage expense?

Question 6

On December 1, Year 1, Blue Company paid its software service provider $15,000 for two years of technical support, and initially recorded the transaction as an administrative expense. Blue Company’s accounting period ends December 31, Year 1, and the services contract begins January 1, Year 2. Under accrual accounting, what adjusting entry must Blue Company record on December 31, Year 1?

Question 7

Calculate the cost of goods sold during Year 1 for America, Inc. Beginning inventory on January 1, Year 1, was $46,000; ending inventory on December 31, Year 1, was $58,000; and America, Inc. purchased $113,000 in inventory throughout Year 1.

Before adjusting entries are recorded to confirm that debits equal credits.

After adjusting entries are recorded to confirm that the entries were recorded correctly.

To confirm that debits still equal credits after necessary adjusting entries have been made.

To confirm that ordinary entries are correct before adjusting entries are recorded.

Question 9

Holding Company purchased a bond from XYZ, Inc. in Year 1 and is due $4,300 in interest that has accrued since XYZ’s semi-annual interest payment in July Year 3. Holding will not receive another interest payment from XYZ until January 14, Year 4, two weeks after the end of the accounting period. What is the appropriate adjusting entry to accrue Holding’s interest revenue?