Question: 1. Not only are you a brilliant accountant, you also have a knack for technology. Over time you've been developing an idea for an internet search engine and email service that would make the founders of Google green with envy. You've begun offering this service for free to everyone, but to start earning revenues you've had to spend a lot of money on advertising. Because of this, you need to arrange for some major financing. Of course, you want to present strong Financial Statements to the loan officer. In a stroke of genius, you've decided to use your advertising expenditures as assets. Please discuss why this is a violation of the matching rule. Please also let us know how the advertising expenditures should be handled and on which financial statement they can be found.
2. Please give an example of an adjusting entry complete with debits and credits and state why that adjustment is important for the fair presentation of the financial statements.