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

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

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Multiple Choice

Which of the following does NOT limit the benefits of deferring income through prepaid expenses?

The matching principle

Tax regulations requiring recognition of income

The need for accurate financial reporting

The ability to estimate future expenses reliably

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Verified step by step guidance

Understand the concept of deferring income through prepaid expenses: Prepaid expenses are payments made in advance for goods or services to be received in the future. These are recorded as assets initially and expensed over time as the benefits are realized.

Review the matching principle: The matching principle in accounting requires that expenses be recognized in the same period as the revenues they help generate. This principle ensures accurate financial reporting but does not directly limit the benefits of deferring income.

Examine tax regulations: Tax regulations often require recognition of income in specific periods, which can limit the ability to defer income through prepaid expenses. This is because tax laws may not align with accounting practices for deferral.

Consider the need for accurate financial reporting: Accurate financial reporting is essential for stakeholders to make informed decisions. This requirement can limit the benefits of deferring income, as financial statements must reflect the true financial position of the company.

Analyze the ability to estimate future expenses reliably: The ability to estimate future expenses reliably does not limit the benefits of deferring income. Instead, it supports the process by ensuring that prepaid expenses are allocated correctly over time.