you are teaching introductory financial accounting. You tell your students "Recording adjusting entries is a critical step in the accounting cycle, and the two major classifications of adjusting entries are prepayments and accruals". one of the students in the class, says, "I don't understand".

Required:

Respond to teacher

1. (a) What are adjusting entries? (b) What is the purpose of adjusting entries? 2. (a) When do prepayments occur? (b) When do accruals occur? 3. (a) Describe the appropriate adjusting entry for prepaid expenses (b) What is the effect (Increase, Decrease, No Effect) on each of the following separately of NOT recording a required adjusting entry for prepaid expenses: (i) net income (ii) assets (iii) liabilities (iv) stockholders' equity 4. (a) Describe the appropriate adjusting entry for accrued expenses (b) What is the effect (Increase, Decrease, No Effect) on each of the following separately of NOT recording a required adjusting entry for accrued expenses: (i) net income (ii) assets (iii) liabilities (iv) stockholders' equity