If an accrued expense is not recorded at the end of the year, what is the impact on the financial statements?
In the income statement, total expenses will be understated and net income will be overstated. In the balance shhet, liabilities will be understated and equity will be overstated.
Accrued expense is the expense which is incuured but remains unpaid as on date.
As accrued expense are recorded it increases the expenses of the business, not recording the accrued expense will reduce the total expenses, and will increase the net income.
Unpaid expenses are reported as liabilities in the balance sheet, hence not recording accrued expense, will reduce the total liabilities. Also, as net income is increased it will increase equity too.
Eastside Magazine collects cash from subscribers in advance and then mails the magazines to subscribers over a one-year period. Requirements 1. Record the journal entry to record the original receipt of $180,000 cash. 2. Record the adjusting entry that Eastside Magazine makes to record earning $8,000 in subscription revenue that was collected in advance. 3. Using T-accounts, post the journal entry and adjusting entry to the accounts involved and show their balances after adjustments. (Ignore the Cash account.)
Question :At the beginning of the year, office supplies of $1,200 were on hand. During the year, Tempo Air Conditioning Service paid $4,000 for more office supplies. At the end of the year, Tempo has $800 of office supplies on hand. Requirements 1. Record the adjusting entry assuming that Tempo records the purchase of office supplies by initially debiting an asset account. Post the adjusting entry to the Office Supplies and Supplies Expense T-accounts. Make sure to include the beginning balance and purchase of office supplies in the Office Supplies T-account. 2. Record the adjusting entry assuming that Tempo records the purchase of office supplies by initially debiting an expense account. Post the adjusting entry to the Office Supplies and Supplies Expense T-accounts. Make sure to include the beginning balance in the Office Supplies T-account and the purchase of office supplies in the Supplies Expense T-account. 3. Compare the ending balances of the T-accounts under both approaches. Are they the same?
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