Question

Match each situation below to two applicable reasons that require an adjustment to be made.

Answer 1

Explanation:

1. Revenue has been earned and liability has been fulfilled

The transaction date of the payment is a month before the date for which the tickets are booked. Hence, creating a liability for the company. The payment has been made in advance. But in the present month the liability of the advance payment received is fulfilled. Hence the liability generated last month fulfilled.

2. Revenue has been earned and asset has been acquired

The work performed in regard to the advertising campaign is completed by the company for which the revenue is due from the party for which the work is done. Hence resulting in the increase in revenue and increase in the asset as accrued revenue.

3. Expense has been incurred and liability has been incurred

The payment of an expense is due, resulting in the increase in the expense and creation of a liability. The bill received in the period of the current month for the duration of the current month for which the services has been provided. The mandatory payment is to be done in the coming month.

4. Expense has been incurred and asset has been used up

The benefits of the asset of the company is used up for the payment of the expense resulting in the increase in the expense and decrease in the value of the asset as the benefits added value to the asset once the benefits are used the value of the asset is decreased.

5. Revenue has been earned and asset has been acquired

The company completed the project and the payment for the project is to be received in the next month, resulting in the increase in earned revenue and the creation of the asset accrued revenue. The payment to be received in the coming month hence the accrued revenue account will shoot up with amount of payment to be received.

6. Revenue has been earned and liability has been fulfilled

The company issued gift cards and earned the revenue, but the redemption was done in the next month. Hence, creation of the liability as the advance payment is received but when the redemption is done the liability of the advance payment is discharged.

7. Expense has been incurred and asset has been used up

The benefits of the asset of the company is used up for the payment of the expense resulting in the increase in the expense and decrease in the value of the asset as the benefits added value to the asset once the benefits are used the value of the asset is decreased.

8. Expense has been incurred and liability has been incurred

The payment of an expense is due, resulting in the increase in the expense and creation of a liability. The bill received in the period of the current month for the duration of the current month for which the services has been provided. The mandatory payment is to be done in the coming month. Hence, liability is increased.