Cases For Critical Thinking in Accounting?

Follow
  • Follow publicly
  • Follow privately
  • Unfollow
Gretel Bakken forgot to journalize and post the adjusting entry for prepaid insurance at the end of the June fiscal period. What effect will this omission have on the records of Ms. ...show more
Update : the second part is question #2
Best Answer
  • JKRB answered 3 years ago
Gretel Bakken forgot to journalize and post the adjusting entry for prepaid insurance at the end of the June fiscal period. What effect will this omission have on the records of Ms. Bakken's business as of June 30? Explain your answer. Question #1

The adjusting entry should have been:
Dr Insurance Expense
Cr Prepaid Insurance
Without the adjustment expenses will be understated, which will overstate Equity. Assets will be overstated.

Vicente Burgos states that his business is so small that he just records supplies and insurance as expenses when he pays for them. Thus, at the end of a fiscal period, Mr. Burgos does not record adjusting and closing entries for his business. Do you agree with his accounting procedures? Explain your answer

According to the matching principle, expenses should be matched to the revenues in the period in which they were produced. By expensing these items at the time of purchase, the owner is not abiding by this principle.
  • Rate
  • Comment
Sign In 

to add your answer

No other answers

Who is following this question?

    %
    BEST ANSWERS
    Member Since:
    Points: Points: Level
    Total Answers:
    Points this week:
    Follow
     
    Unfollow
     
    Block
     
    Unblock