CFA Level I:FSA : Financial Reporting mechanics(Reading 23) 习题精选
1.In accrual accounting, if an adjusting entry results in the reduction of an asset and the recording of an expense, the originating entry recorded was most likely a(n):
A. Prepaid expense.
B. Accrued expense.
C. Deferred revenue.
Ans: A.
The adjusting entry to record the expiry of a prepaid expense is the reduction of an asset (the prepaid) and the recognition of the expense.
For example, to record insurance expense:
Insurance expense 100
Prepaid insurance expense 100
B is incorrect. Accrued expense is an accounting expense recognized in the books before it is paid for. It is a liability, and is usually current. For example, at the end of the month, a company will accrue its salary expense before actually paying the employees. The entry is:
Salary expense 100
Salary payable 100
C is incorrect. Deferred revenue is advance payment or unearned revenue, recorded on the recipient’s balance sheet as a liability, until the services have been rendered or products have been delivered. For example, if a firm gets advance payment before deliver the good, it needs to make the following entry:
Cash 100
Deterred revenue 100 |