D102 Financial Accounting - Set 3 - Part 3

Correct Answer: Accounts receivable

Cash equivalents are short-term, highly liquid investments with maturities of three months or less, such as treasury bills and commercial paper.

Correct Answer: Debit unearned revenue, credit cash

When cash is received before services are provided, it creates a liability (unearned revenue) that is credited.

Correct Answer: It increases assets

Accumulated depreciation is a contra-asset account that reduces the book value of an asset over time.

Correct Answer: Asset

Unearned revenue is a liability because it represents an obligation to provide services or goods in the future.

Correct Answer: Increase in assets and liabilities

Purchasing supplies on account increases assets (supplies) and liabilities (accounts payable).

Correct Answer: Balance sheet

The income statement reports a companys revenues, expenses, and net income or loss over a specific period.

Correct Answer: Increases assets and decreases liabilities

Issuing common stock increases cash (an asset) and stockholders' equity.

Correct Answer: As an asset

Prepaid expenses are classified as assets because they represent future economic benefits that will be used up over time.

Correct Answer: Assets and equity increase

When services are provided on account, accounts receivable (asset) increases, and service revenue (equity) also increases.

Correct Answer: Bad debt expense

Under the allowance method, writing off an uncollectible account reduces the allowance for doubtful accounts (debit), while the accounts receivable account is credited.