Which of the following account balances will typically be increased as a result of adjusting entries? (Select all that apply.)Multiple select question.CashSuppliesDeferred RevenueInterest PayableSupplies ExpensePrepaid Rent
Question
Which of the following account balances will typically be increased as a result of adjusting entries? (Select all that apply.)Multiple select question.CashSuppliesDeferred RevenueInterest PayableSupplies ExpensePrepaid Rent
Solution
The account balances that will typically be increased as a result of adjusting entries are:
- Deferred Revenue
- Interest Payable
- Supplies Expense
Here's why:
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Deferred Revenue: This is a liability account that represents the amounts that have been received in advance for services or goods to be provided in the future. When the service is finally provided or the goods are delivered, an adjusting entry is made to decrease the deferred revenue account and increase the revenue account.
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Interest Payable: This is a liability account that represents the interest expense that has been incurred but not yet paid. When the interest is paid, an adjusting entry is made to decrease the interest payable account and increase the cash account.
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Supplies Expense: This is an expense account that represents the cost of supplies used during a period. At the end of the period, an adjusting entry is made to decrease the supplies account (an asset) and increase the supplies expense account.
Cash, Supplies, and Prepaid Rent are not typically increased by adjusting entries. Cash is decreased when expenses are paid. Supplies and Prepaid Rent are assets that are typically decreased over time as they are used or consumed.
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