Question

Plz write in your own text and don't copy answers that was answered before since my teacher has (Plagiarism checker) thank you at least 3-4 paragraphs

1. What is a prepaid expense? Why does a company have to make this adjustment? What other adjusting entries do a company need to make for a period before preparing financial statements?

2. Why it important to reconcile the bank statement?
What are some of the items involved in the reconciliation process? What do you do when you find errors during reconciliation? What happens if you don’t fix them? Name other accounts that can be reconciled.

at least 3-4 paragraphs at least 3-4 paragraphs Make sure you write on text not in pic since its hard to read from

Answer 1

1

Prepaid expenses are future expenses that have been paid in advance.According to generally accepted accounting principles (GAAP), expenses should be recorded in the same accounting period as the benefit generated from the related asset therefore company needs to make this adjustment.

For example, XYZ Company purchases insurance for the upcoming twelve month period. It pays $240,000 upfront for the insurance policy. XYZ Company will initially book the full $240,000 as a debit to prepaid insurance, an asset on the balance sheet, and a credit to cash. Each month, an adjusting entry will be made to expense $20,000 (1/12 of the prepaid amount) to the income statement through a credit to prepaid insurance and a debit to insurance expense. In the twelfth month, the final $20,000 will be fully expensed and the prepaid account will be zero.

The other adjusting entries do a company need to make for a period before preparing financial statements

Accrued revenues is  that which has been earned by providing a good or service, but for which no cash has been received

Accrued expenses is  that expense which is  recognized on the books before it has been paid

Deferred revenues  refers to payments received in advance for services which have not yet been performed or goods which have not yet been delivered

2

When you reconcile your  bank account, you compare your internal financial records against the records provided to you by your bank. A monthly reconciliation helps you identify any unusual transactions that might be caused by fraud or accounting errors, and the practice can also help you spot inefficiencies.It is extremely common for there to be differences between the two balances, which you should track down and adjust in your own records. It is also useful to complete a bank reconciliation to see if any customer checks have bounced, or if any checks you issued were altered or even stolen and cashed without your knowledge

Some of the items involved in the reconciliation process are

The bank has charged fees for its services, such as a monthly account fee, Check printing charges

Deposits in transit are amounts that are received and recorded by the business but are not yet recorded by the bank

Errors in the cash account result in an incorrect amount being entered or an amount being omitted from the records.

When we find errors during reconciliation we must instantly correct or rectify them . If the error is in our books we must understand that if the error was a typo error or ommisison error or fraudulent mischief and appropriately investigate and take the appropriate steps . Set up better internal controls to ensure the risk is reduced. Incase of an error from the bank we must contact and communicate the officials and inform them of such error. In general, errors must be reported within 30 to 90 days from the bank statement date. When it comes to an electronic funds transfer, you have up to 60 days.

If we dont fix them they may continue happen more in the future as well as our books will be showing incorrect amounts and balances

Other accounts that require reconciliation are

Credit Card Reconciliation.

Customer Account Reconciliation.

Vendor Account Reconciliation.

Tax Reconciliation.

Inter-Company Reconciliation.