If a Company Has Advance Subscription Sales Totaling $45,000 for the Upcoming

question 176

Multiple Choice

If a company has advance subscription sales totaling $45,000 for the upcoming year,when four quarterly journals will mailed to customers,the receipt of cash would be journalized as:

• A)Debit Cash $45,000; credit Unearned Revenue $45,000.
• B)Debit Unearned Revenue $45,000; credit Sales $45,000.
• C)Debit Cash $45,000,credit Accounts Payable $45,000.
• D)Debit Sales $45,000,credit Unearned Revenue $45,000.
• E)Debit Prepaid Subscriptions $45,000,credit Sales $45,000.

Comprehend the concept and application of accrual accounting versus cash basis accounting.

Describe the purpose of adjusted and unadjusted trial balances and their roles in preparing financial statements.

Differentiate between the various types of adjusting entries: prepaid expenses, unearned revenues, accrued revenues, and accrued expenses.

Calculate and interpret a company's profit margin ratio.

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Definitions:

Budget Slack

The practice of underestimating revenue or overestimating costs while preparing a budget to create a buffer, which can be used to handle unforeseen financial situations.

Planning

The process of setting goals, determining resources needed to achieve those goals, and outlining the steps necessary to accomplish them.

Loose Budgets

A financial plan that allows for higher spending and less stringent controls, often to accommodate for uncertainty or to encourage creativity and innovation.

Cash Budget

A financial plan that estimates incoming and outgoing cash flows over a specific period of time to ensure liquidity and solvency.