In which two scenarios should you use a periodic journal? Each correct answer presents a complete solution.

Question

Options

• AYou prepaid your annual insurance and want to amortize the expense monthly throughout the
• BYou need to revalue automatically foreign currency transactions in the general ledger based
• CYou need to automatically allocate your monthly indirect expenses to departments based on
• DYou need to pay a fixed management fee on the first day of every quarter.

• A
  80% (20)
• B
  16% (4)
• C
  4% (1)

Explanation

D: Periodic journals are sometimes called recurring journals because the amount, text, and other information are repeated each time that the journal is posted. When you create the journal, you specify the period interval for the recurrence, such as days or months. You also specify the number of periods for which the journal will be posted. A: For example, an insurance company offers your organization a discount for prepaying the insurance policy for an entire year. The payment is posted to an asset account such as prepaid insurance. You then amortize your monthly insurance expense throughout the year by creating a periodic journal that contains a credit to the prepaid insurance account and a debit to an insurance expense account.

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