Exercise 4-24: The Effect of Adjustments on the Accounting Equation
Determine whether recording each of the following adjustments will increase (i) decrease (d) or have no effect (NE) on each of the three elements of the accounting equation.
Transactions Assets = Liabilities + SE
Prepaid insurance is reduced for the portion
of the policy that has expired during the period.
Interest incurred during the period but not yet
Paid is accrued.
Depreciation for the period is recorded
Revenue is recorded for the earned portion of a
liability for amounts collected in advance from
customers.
Rent revenue is recorded for amounts owed by
a tenant but not yet received.
Income taxes owed but not yet paid are accrued.
Exercise 4-25: The accounting Cycle
The steps in the accounting cycle are listed in random order. Fill in the blank next to each step to indicate its order in the cycle. The first Step in the cycle is filled in as an example.
ORDER PROCEDURE
_________ Prepare a work sheet.
_________ Close the accounts.
_________ Collect and analyze information from source documents
_________ Prepare financial statements.
_________ Post transactions to accounts in the ledger.
_________ Record and post adjustments
_________ Journalize daily transactions
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