Question

7. With each of the scenarios below, name all financial statement accounts affected, and whether it increased or decreased each account: a. Additional revenue is accrued at year end, that is earned but not received. b. The portion of revenue that is earned as of year end that had previously been recorded in unearned revenue when the customer paid. c. Portion of expiring insurance recorded. d. Salaries earned by employees but not paid until after year end is recorded. Regarding all of the entries discussed above, these are applicable to which basis of accounting? _____ Cash basis of accounting _____ Accrual basis of accounting

Answer 1

a	Additional revenue is accrued at year end, that is earned but not received
	This will affect the revenue account of income statement and accounts
	receivable account of balance sheet.
	Both the revenue account and accounts receivable account will increase,
	as this will increase the revenue, and balance receivable
b	The portion of revenue that is earned as of year end that had previously
	been recorded in unearned revenue when the customer paid.
	This will affect the revenue account of income statement and unearned
	revenue account of balance sheet.
	Revenue account will get increase whereas unearned revenue will get
	decreased with this entry.
	Unearned revenue Dr.
	Revenue Cr.
c	Portion of expiring insurance recorded
	This will affect the insurance expense in income statement and prepaid
	insurance in balance sheet
	Insurance expense will increse with this entry and prepaid insurance will
	decrease, as a portion of prepaid insurance will be transferred to expense
	accoount
	Insurance expense Dr.
	Prepaid Insurance Cr.
d	Salaried earned by employees but not paid until after year end is recorded.
	This will affect the salaries expense account in income statement and
	salaries payable in balance sheet
	This entry will increase the amount of salaries expense and salaries payable
	Salaries payable is current liabilities
	Salaries expense Dr.
	Salaries Payable Cr.
	All these entries discussed above, are applicable to Accrual basis of
	accounting, as the revenue is recorded when earned, whether cash received
	or not and expenses are recorded when occurred, whether cash paid or not