11.Recording expenses early overstates current-period income; recording expenses late understates current period income.
12.Prior to recording adjusting entries at the end of an accounting period, some accounts may not show correct balances even though all transactions were properly recorded.
13.On October 15, a company received $15,000 cash as a down payment on a consulting contract. The amount was credited to Unearned Consulting Revenue. By October 31, 10% of the services required by the contract were completed. The company will record consulting revenue of $1,500 from this contract for October.
Revenue = $15,000 * 10% = $1,500
14.Adjusting entries are designed primarily to correct accounting errors.
15.Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account.
16.Each adjusting entry will affect a balance sheet account.
17.Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.
18.Accrued revenues at the end of one accounting period are expected to result in cash collections in a future period.
19.Each adjusting entry affects one or more income statements account, one or more balance sheet account, and never cash.
20.Accrued expenses reflect transactions where cash is paid
before
a related expense is recognized.