Patricia Event Planning Service Records Prepaid Expenses and Unearned Revenues

question 14

True/False

Patricia Event Planning Service records prepaid expenses and unearned revenues using the alternative treatments. Patricia makes adjusting entries as needed to bring her books to the full accrual basis once a year at the end of the year. On October 1, she paid $3,600 for insurance for a one-year period. At the end of the year, she will make an adjustment entry that debits Insurance Expense for $900.

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Definitions:

Adjusting Entry

An adjusting entry is made in the accounting records at the end of a period to allocate income and expenditures to the appropriate period.

Insurance Expense

The cost incurred by a business or individual for purchasing insurance coverage.

Office Supplies Expense

The cost associated with purchasing supplies used in the daily operations of an office.

Office Supplies

Materials and items used daily in offices for administrative tasks and functions, not part of inventory sold.