Adjusting Entries and Reconciliations Flashcards

A company collected $6,000 in advance for services to be performed over 6 months. After 2 months, what adjusting entry is required?

Answer: Debit Unearned Revenue $2,000; Credit Service Revenue $2,000

After 2 months, $6,000 × 2/6 = $2,000 of revenue has been earned, shifting it from Unearned Revenue to Service Revenue.

An outstanding check on a bank reconciliation should be:

Answer: Subtracted from the bank balance

Outstanding checks have been deducted in the books but not yet cleared the bank, so they are subtracted from the bank balance.

What is the purpose of the adjusted trial balance?

Answer: To verify that debits equal credits after adjusting entries are posted

The adjusted trial balance confirms that total debits still equal total credits after all adjusting entries have been recorded.

Which of the following would NOT require an adjusting entry at period end?

Answer: Cash paid for a current-period utility bill

A cash payment for a current-period bill is already recorded in full and requires no adjustment.

If a bookkeeper fails to record an accrued expense adjusting entry, what is the effect on the financial statements?

Answer: Expenses understated; net income overstated; liabilities understated

Omitting an accrued expense understates expenses, overstates net income, and understates liabilities.

A bookkeeper discovers a $500 check returned NSF (non-sufficient funds) on the bank statement. What is the correct journal entry?

Answer: Debit Accounts Receivable $500; Credit Cash $500

An NSF check reduces the bank and book cash balances, so Cash is credited and Accounts Receivable is reinstated.

Which statement best describes a deferral-type adjusting entry?

Answer: Allocating previously recorded cash transactions to the correct period

Deferrals adjust items already recorded as assets or liabilities (from cash receipts or payments) to recognize the appropriate revenue or expense in the current period.