True/False: Adjusting Entries in Accounting

Technically, adjusting entries are entries prepared prior to the preparation of financial statements to update certain accounts so that they reflect the correct balances as of designated time.

• True

• False

An adjusting entry includes at least one income statement account and at least one balance sheet account.

• True

• False

Accrual accounting recognizes revenues and expenses at the point that cash changes hands.

• True

• False

Accrued revenue is a term used to describe revenue that has been earned but not yet collected.

• True

• False

The adjusting entry to allocate part of the cost of a one-year fire insurance policy to expense will cause total assets to decrease.

• True

• False

The adjusting entry to recognized earned portion of a revenue received in advance will cause total liabilities to increase.

• True

• False

Assets become liabilities when they expire.

• True

• False

The adjustment to record depreciation of property and equipment consist of a debit to accumulated depreciation and a credit to depreciation expense.

• True

• False

Adjusting entries are useful in apportioning costs among two or more accounting periods.

• True

• False

When the reduction in prepaid expenses is not properly recorded, this causes the asset accounts and expense accounts to be overstated.

• True

• False