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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Why is it necessary to make adjusting entries for accrued revenues at the end of the accounting period?

To record cash received in advance for future services as revenue immediately.

To recognize revenues that have been earned but not yet recorded, ensuring compliance with the revenue recognition principle.

To decrease total assets and liabilities on the balance sheet.

To reverse previously recorded revenue transactions that were made in error.

Previous problemNext problem

Verified step by step guidance

Understand the concept of accrued revenues: Accrued revenues are revenues that have been earned during the accounting period but have not yet been recorded because the cash has not been received. This is important for compliance with the revenue recognition principle, which states that revenue should be recognized when it is earned, not necessarily when cash is received.

Review the purpose of adjusting entries: Adjusting entries are made at the end of the accounting period to ensure that all revenues and expenses are properly recorded in the correct period. This helps maintain accurate financial statements and ensures compliance with accounting principles.

Identify the impact on financial statements: Without adjusting entries for accrued revenues, the income statement would understate revenues, and the balance sheet would understate assets (e.g., accounts receivable). Adjusting entries correct these inaccuracies.

Determine the journal entry for accrued revenues: The adjusting entry typically involves debiting an asset account (e.g., Accounts Receivable) to recognize the amount owed and crediting a revenue account to record the earned revenue.

Ensure compliance with the revenue recognition principle: Making adjusting entries for accrued revenues ensures that the financial statements reflect the revenues earned during the period, regardless of whether cash has been received, aligning with the revenue recognition principle.