US Accounting_Chapter 3

Which of the following best describes "deferred revenue"?

• An expense that has been incurred but not yet paid

• Income that has been earned but not yet received

• Revenue earned after the fiscal year-end

• A liability representing revenue received before services are performed

As time passes, the accumulated depreciation and the carrying value related to a plant asset

• Both decrease

• Decrease and increase, respectively

• Both increase

• Increase and decrease, respectively

Failure to record an adjusting entry for accrued interest expense will not result in:

• An overstatement of total equity

• An understatement of total liabilities

• An overstatement of net income

• An overstatement of total assets

Which of the following is an example of an accrual?

• A commission earned but not yet recorded

• A commission collected but not yet earned

• Recording a cash sale

• Depreciation of an asset

Which of the following accounts is affected by an adjusting entry for prepaid insurance?

• Cash

• Accounts Payable

• Insurance Expense

• Unearned Revenue

Which of the following adjusting entries would be classified as an accrual?

• Recording depreciation expense

• Recording salaries expense that has been incurred but not yet paid

• Recording the expiration of prepaid insurance

• Recording prepaid rent as an expense

Which of the following is NOT a type of adjusting entry?

• Accrual of expenses

• Deferral of expenses

• Deferral of revenues

• Accrual of assets

What is the purpose of adjusting entries in accrual accounting?

• To correct errors in the trial balance

• To close temporary accounts at the end of the period

• To record cash transactions that were not previously recorded

• To ensure that revenues and expenses are recorded in the period they are earned or incurred

Missing to record depreciation at the end of the year will result in a(n)

• Overstatement of total liabilities

• Understatement of net income

• Overstatement of total assets

• Understatement of total liabilities

The order of preparing the financial statements from the adjusted trial balance is

• Income statement, balance sheet, statement of retained earnings

• Statement of retained earnings, income statement, balance sheet

• Balance sheet, statement of retained earnings, income statement

• Income statement, statement of retained earnings, balance sheet