Question

4) Accrual-basis accounting means that transactions that change a companys financial statements are recorded in the periods in which the events occur: a. only if cash is exchanged b. even if cash was not exchanged c. only if cash is not exchanged 5) Interest of $600 has accrued on a note payable. What is the necessary adjusting entry to record this interest? Debit Credit If this adjustment is not made, the following are overstated, understated, or not impacted: Assets: Revenue: Liabilities: Expense: Stockholders' Equity: 6) XYZ Co, has $500 of supplies on hand, but their Supplies account shows a balance of $2,000. What is the necessary adjusting entry? Debit Credit If this adjustment is not made, the following are overstated, understated, or not impacted: Assets: Revenue: Liabilities: Expense: Stockholders' Equity: 7) The depreciation on XYZ Co.'s office equipment is $300 per month. What is the necessary adjusting entry to record monthly depreciation? Debit Credit If this adjustment is not made, the following are overstated, understated, or not impacted: Assets: Revenue Liabilities: Expense: Stockholders' Equity:

Answer 1

4) Accrual basis of accounting is when the particular trasnaction is recorded in the books of accounts irrespective of cash is being paid or not as it was related to the particular period expenses or income. So answer is Option b) 5) Credits Debit $ 600 Date Accounts Title & Explanation XX-XX-XXXX Interes expense To Interest Payable (Entry for accrued interest expense) 600 If the above entry is not made, Expenses will be understated by $ 600 consequently stockholders equity will be overstated by S 600 and Liability will be understated by $ 600. There is no effect on assets and revenues. 6) Credit S Debit $ 1,500 Date Accounts Title & Explanation XX-XX-XXXX Supplies expense (2000-500) To Supplies (Entry for supplies consumed) 1,500 If the above entry is not made, Expenses will be understated by $ 1,500 consequently stockholders equity will be overstated by 1,500 and Assets will be overstated by $ 1,500. Liabilities and revenues will have no effect of this. Credits Debit $ 300 7) Date Accounts Title & Explanation XX-XX-XXxx Depreciation expenses - Office equipment To Accumulated depreciation - Office equipment (Entry for recording of monthly depreciation) 300 If the above entry is not made, Expenses will be understated by $ 300 consequently stockholders equity will be overstated by S 300 and Asset (Accumulated depreciation) will be Overstated by $ 300. Liability and revenues will have no impact.