1. 4.1 Describe the revenue recognition principle. Give specifics.
2. 4.1 Describe the expense recognition principle (matching principle). Give specifics.
266 Chapter 4 The Adjustment Process
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3. 4.2 What parts of the accounting cycle require analytical processes, rather than methodical processes?
Explain.
4. 4.2 Why is the adjusting process needed?
5. 4.2 Name two types of adjusting journal entries that are commonly made before preparing financial
statements? Explain, with examples.
6. 4.2 Are there any accounts that would never have an adjusting entry? Explain.
7. 4.2 Why do adjusting entries always include both balance sheet and income statement accounts?
8. 4.2 Why are adjusting journal entries needed?
9. 4.3 If the Supplies account had an ending balance of $1,200 and the actual count for the remaining
supplies was $400 at the end of the period, what adjustment would be needed?
10. 4.3 When a company collects cash from customers before performing the contracted service, what is
the impact, and how should it be recorded?
11. 4.3 If the Prepaid Insurance account had a balance of $12,000, representing one year’s policy premium,
which was paid on July 1, what entry would be needed to adjust the Prepaid Insurance account at the end of
December, before preparing the financial statements?
12. 4.3 If adjusting entries include these listed accounts, what other account must be in that entry as well?
(A) Depreciation expense; (B) Unearned Service Revenue; (C) Prepaid Insurance; (D) Interest Payable.
13. 4.4 What is the difference between the trial balance and the adjusted trial balance?
14. 4.4 Why is the adjusted trial balance trusted as a reliable source for building the financial statements?
15. 4.5 Indicate on which financial statement the following accounts (from the adjusted trial balance) would
appear: (A) Sales Revenue; (B) Unearned Rent Revenue; (C) Prepaid Advertising; (D) Advertising Expense; (E)
Dividends; (F) Cash.