Question

1. What is the major difference between the unadjuste and the adjusted trial balance? | 1. The adjusted trial balance will show the net income (loss) as an additional acce 1. Unlike the adjusted trial balance, the unadjusted trial balance will continue wit period processing even if it is not in balance. The adjusted trial balance includes the postings of the adjustments for the peric balance of the accounts. 11. The adjusted trial balance will be used to record the adjustments for the period. 2. Notes receivable due in 390 days appear on the 1. balance sheet in the current assets section b. balance sheet in the noncurrent assets section c. balance sheet in the current liabilities section d. income statement as an expense b. 3. Unearned Fees appear on the 1. balance sheet in the current assets section b. balance sheet as a current liability balance sheet in the stockholders' equity section la income statement as revenue 4. Prepaid insurance is reported on the balance sheet 11. current asset |b. fixed asset c. current liability d. long-term liability 5. The income statement should be prepared 13. before the retained earnings statement and balance sheet | after the retained earnings statement and before the balance sheet 16. after the retained earnings statement and balance sheet d. after the balance sheet and before the retained earnings statement

Answer 1

Answer to Q#1 (First question in the list): Option-(c): The adjusted trial balance includes the postings of the adjustments for the period and updated balance of the accounts. Reason: Accounting is a process of identifiying, classifying, categorizing, recording, grouping and presenting the business transactions in an understandable manner in accordance with applicable statutory provisions of the land. In case of management accounting, the term accounting is not required to follow statutory provisions but must concentrate on yielding end-results as required by the management for various business or operational decision purpose. After recording business transactions in general journal, every journal entry shall be posted to respective general ledgers affected by such journal entry. After balancing the general ledger accounts, accountant will prepare a statement called trial balance where ending balance of each ledger account will be listed in the order of liquidity starting with asset accounts first, followed by liability accounts followed by equity accounts followed by revenue accounts and then finally expense accounts.

As each journal entry requires dual accounting entry such as one debit and one credit, trial balance helps to check arithmetic accuracy of postings made to general ledgers from journal entries. Arithmetically, total of debit side of the trial balance must match with total of credit side of the trial balance. Therefore, it helps to test the arithmetical accuracy of the ledger. It is called as unadjusted trial balance as it doesn't include postings of the adjusting entries that are required at the end of the reporting period concerned. Adjusting entries are those journal entries that are required to be recorded at the end of respective reporting period in order to update firm's accounting records the actual revenue and expenditures for the period on accrual basis. For example, prepaid expense is an expense paid in advance by a firm for future period. It is recorded as an asset when it was paid initially. At the end of reporting period, expired portion of prepaid balance for the period shall be recorded as an expense by decreasing the prepaid expense balance to the same extent. Service revenue received in advance is 'advance received from customer(s)' by a firm for future period. It is recorded as liability (Unearned revenue) when it was received initially paid. At the end of reporting period, earned portion of service revenue for the period shall be recorded as an revenue by decreasing the advance received balance to the same extent.

Accrued expenses refers to expenses incurred but payment for which are deferred as per trade agreements entered into with the vendors by customers. Irrespective of period of payments, accrued expense shall be expensed in the period in which such expense accrued. Accrued service revenue refers to service completed by by a firm during current period but payment for the same may be collected in future date as per terms agreed on the service contract entered into with the customers. It is recorded as an asset when it was accrued by recognizing revenue for the same as at the end of reporting period. So, after posting these adjusting entries in appropriate ledger accounts, balance reported in unadjusted trial balance will be updated to reflect updated ledger balances after adjustments in the adjusted trial balance. Option-(a) is incorrect because trial balance, whether unadjusted or adjusted, will never show net income or loss for the period. Option-(b) is incorrect because trial balance, whether unadjusted or adjusted, must tally in debits and credits always. Option-(d) is incorrect because adjusted trial balance is the end-result after posting adjusting entries in ledger accounts. So, it cannot be used to record the adjusting entries.