Adjusting entries for
Blank
______ revenues and expenses are necessary when the cash was collected or paid in the past. Adjusting entries for
Blank
______ revenues and expenses are necessary when the earning of revenues and incurring of expenses occurred prior to the cash changing hands.

Question

Adjusting entries for 
Blank
______ revenues and expenses are necessary when the cash was collected or paid in the past. Adjusting entries for 
Blank
______ revenues and expenses are necessary when the earning of revenues and incurring of expenses occurred prior to the cash changing hands.

BlackTom AI · Accepted Answer

Deferrals occur when cash is received or paid before the related revenue is earned or the expense is incurred, so the adjusting entry must reverse or allocate that prior cash transaction to the proper period. Accruals occur when revenue has been earned or an expense has been incurred but cash will be received or paid in a later period, so an adjusting entry records the revenue/expense and the related receivable or payable.

1) Relevant knowledge points and concepts
- Deferral (prepaid/unearned): cash first, recognition later. Examples: prepaid insurance (asset → expense over time), unearned revenue (liability → revenue as earned).
- Accrual: economic event first, cash later. Examples: accrued revenue (record revenue and accounts receivable), accrued expense (record expense and accounts payable).

2) Step‑by‑step reasoning
- The first sentence: “necessary when the cash was collected or paid in the past.” That describes transactions where cash preceded recognition → deferrals (deferred revenues/expenses).
- The second sentence: “necessary when the earning of revenues and incurring of expenses occurred prior to the cash changing hands.” That describes events recognized before cash flows → accruals (accrued revenues/expenses).

3) Intermediate steps (illustrative journal adjustments)
- Deferred revenue example: Cash received $1,200 for a one‑year service. Initial entry: Cash +1,200; Unearned Revenue +1,200. Monthly adjusting entry when earned: Unearned Revenue −100; Service Revenue +100.
- Accrued expense example: Employees earned $500 wages but unpaid. Adjusting entry: Wages Expense +500; Wages Payable +500.

4) Why the correct answer is correct
- “Deferred; accrued” correctly maps cash-first situations to deferrals and earned-first situations to accruals, matching the accounting definitions and required adjusting entries.

5) Why other options are incorrect
- “unearned; prepaid”: mixes specific account types and reverses the logic; unearned is a kind of deferral, prepaid is an asset—the pairing doesn’t match the prompt pattern.
- “accrued; deferred”: swaps the two concepts, reversing the conditions described.
- “prepaid; unearned”: also reverses and mismatches the scenarios.

6) Conclusion
Therefore the correct completion is “deferred; accrued,” which matches the provided answer.

Adjusting entries for Blank revenues and expenses are necessary when the cash was collected or paid in the past. Adjusting entries for Blank revenues and expenses are necessary when the earning of revenues and incurring of expenses occurred prior to the cash changing hands.单项选择题

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