Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Revenues

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Revenues

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Multiple Choice

Which of the following best describes why adjusting entries for accrued revenues are necessary before today's transactions can be added to the accounting system?

To recognize revenues that have been earned but not yet recorded or received in cash.

To record expenses that have been paid in advance.

To close temporary accounts at the end of the period.

To correct errors made in previous accounting periods.

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Verified step by step guidance

Understand the concept of accrued revenues: Accrued revenues are revenues that have been earned but not yet recorded in the accounting system or received in cash. These adjustments ensure that the financial statements reflect the correct revenue earned during the period.

Review the purpose of adjusting entries: Adjusting entries are made to update the accounts before preparing financial statements. They ensure that revenues and expenses are recognized in the correct accounting period, following the accrual basis of accounting.

Identify the correct reason for adjusting entries for accrued revenues: The primary reason is to recognize revenues that have been earned but not yet recorded or received in cash. This ensures compliance with the revenue recognition principle.

Eliminate incorrect options: Adjusting entries for accrued revenues are not related to recording prepaid expenses, closing temporary accounts, or correcting errors from previous periods. These are separate accounting processes.

Conclude the reasoning: Adjusting entries for accrued revenues are necessary to ensure that the financial statements accurately reflect the earned revenues for the period, even if cash has not yet been received.