Fundamental Accounting Principles Study Set 5
Quiz 3: Adjusting Accounts and Preparing Financial Statements
A Contra Account Is an Account Linked with Another Account;
A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.
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If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance of Prepaid Rent as of December 1 should be $1,500.
Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.
A salary owed to employees is an example of an accrued expense.
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