FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The adjusting entry to record a contingent liability requires a debit to a loss (or expense) account and credit to a liability.
TRUE OR FALSE?
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- Which of the following would NOT be shown in the Statement of Profit or Loss? Expired portion of insurance Withdrawal of supplies by the owner Depreciation of fixed assets for the period Services rendered to a customer on accountarrow_forwardCorrecting a prior period entry requires a prior period adjustment to what account?arrow_forwardDistinguish the difference between Bad Debts and Provision for Doubtful Debts, indicating the accounting treatment given to an increase/decrease in the Provision for Doubtful Debts and the impacts generally on Income Statements and Statements of Financial Statements.arrow_forward
- Which following statement is a correct statement about the direct write-off method for calculating credit loss expense? A. It is in accordance with GAAP. B. It uses an allowance for credit losses account. C. It tends to understate accounts receivable on the balance sheet. D. It recognizes credit loss expense when a specific account is determined to be uncollectible.arrow_forwardWhen is bad debts expense recorded when using the allowance method?arrow_forward9arrow_forward
- explain the impact on the balance sheet and income statement, specifying which accounts are affected and whether the balance is over or understated, if adjustments to recognize prepaid insurance as being expired and unearned revenue as being earned, are not recorded.arrow_forwardA liability account is increased by a debit. OTrue O Falsearrow_forwardWhat is the unique balance sheet disclosure that the Allowance Method requires, as opposed to the direct write-off method of accounting for bad debts?arrow_forward
- Which of the following is a limitation of the direct write-off method of accounting for uncollectible? The direct write-off method overstates assets on the balance sheet. The direct write-off method does not match expenses against revenue very well. The direct write-off method does not set up an allowance for uncollectible. All of the abovearrow_forwardAn encumbrance represents the estimated future liabilities for goods or services resulting from placing a purchase order or signing a contract. a. True b. Falsearrow_forwardWhen an advance collection of income has been recorded under the liability method, an adjusting entry is needed to recognize the increase in the balance of the real account. O decrease in the balance of the nominal account. earned portion of the precollection O unearned portion of the precollection.arrow_forward
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