Reading 30: Financial Reporting Mechanics LOS d习题精选 accounting, following, 2010, statements

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LOS d: Explain the need for accruals and other adjustments in preparing financial statements.

Which of the following is the least likely to be considered an accrual for accounting purposes?

A) Wages payable.

B) Unearned revenue.

C) Accumulated depreciation.

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Accruals fall into four categories:
1. Unearned revenue.
2. Accrued revenue.
3. Prepaid expenses.
4. Accrued expenses. Wages payable are a common example of an accrued expense.

Accumulated depreciation is considered a contra-asset account to property, plant and equipment, not an accrual.

 

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Accruals are best described as requiring an accounting entry:

A) when the earliest event in a transaction occurs.

B) when an expense has been incurred.

C) only when a good or service has been provided.

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Accruals require an accounting entry when the earliest event occurs (paying or receiving cash, providing a good or service, or incurring an expense) and one or more offsetting entries as the exchange is completed.

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An accounting entry that updates the historical cost of an asset to current market levels is best described as:

A) a contra account.

B) a valuation adjustment.

C) accumulated depreciation.

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In some cases, accounting standards require balance sheet values of certain assets to reflect their current market values. Accounting entries that update these assets’ values from their historical cost are called valuation adjustments. To keep the accounting equation in balance, changes in asset values are also changes in owners’ equity, through gains or losses on the income statement or in “other comprehensive income.”