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 situations requires an adjusting entry that is not a prepayment or an accrual entry?

Recognizing interest earned but not yet received

Adjusting for prepaid insurance that has expired

Recording revenue for services performed but not yet billed

Recording depreciation expense on equipment

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Verified step by step guidance

Understand the concept of adjusting entries: Adjusting entries are made at the end of an accounting period to ensure that revenues and expenses are recognized in the period they are incurred, following the accrual basis of accounting.

Identify the types of adjusting entries: Adjusting entries typically fall into four categories: prepayments (prepaid expenses and unearned revenues), accruals (accrued revenues and accrued expenses), depreciation, and other adjustments.

Focus on the situation described in the problem: Recording depreciation expense on equipment is not a prepayment or an accrual entry. Depreciation is an allocation of the cost of a tangible asset over its useful life, reflecting the wear and tear or obsolescence of the asset.

Determine the journal entry for depreciation: The adjusting entry for depreciation involves debiting the Depreciation Expense account and crediting the Accumulated Depreciation account. This reduces the book value of the asset and recognizes the expense in the current period.

Understand why this is not a prepayment or accrual: Depreciation does not involve cash transactions or timing differences between cash flows and revenue/expense recognition. It is a systematic allocation of cost based on the asset's useful life.