Adjusting Entries

1. What is the purpose of adjusting entries?

2. Name the four general types of adjustments.

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3. Give three examples of accrued expenses.

4. Briefly explain why it is difficult for accountants to determine whether or not revenue has been earned if the sales process is not complete.

5. Give an example of business or industry where customers usually pay for the product or service in advance.

6. What type of account is unearned revenue?

7. When should a company reclassify unearned revenue to revenue?

8. Why do companies produce a second trial balance? When is this second trial balance prepared?

9. Why do accountants prepare closing entries?

10. Into which account are revenues and expenses closed?