Question

Four types of adjustments are described in the chapter: (1) prepaid expenses, (2) unearned revenues,

(3) accrued expenses, and (4) accrued revenues.

Required

1. Formlearning teamsof four (or more) members. Each team member must select one of the four adjustments

as an area of expertise (each team must have at least one expert in each area).

2. Formexpert teamsfrom the individuals who have selected the same area of expertise. Expert teams

are to discuss and write a report that each expert will present to his or her learning team addressing the

following:

a. Description of the adjustment and why it’s necessary.

b. Example of a transaction or event, with dates and amounts, that requires adjustment.

c. Adjusting entry(ies) for the example in requirementb.

d. Status of the affected account(s) before and after the adjustment in requirementc.

e. Effects on financial statements of not making the adjustment.

3. Each expert should return to his or her learning team. In rotation, each member should present his or

her expert team’s report to the learning team. Team discussion is encouraged.

Short answer

Answer:

All assets are overstated.

Step-by-step solution

Definition of adjustment entry

It is the entry that closes the temporary account at the end of accounting period.

Effect of not making adjustments

If the adjustment is not made, all the assets and income are overstated, and all the expenses are understated. The other effect of not preparing the adjusting entry is that the balance of the account is not correctly entered. This will affect income and the profitability of the company. If a company did not prepare the adjusting account the accrued and the unearned revenue of the company is not treated in the right way. This will errors in the financial statements of the company. These are some of the effect for not making adjustment entries.