Which of the followings statements is FALSE.

Adjusting entries are entries made after the preparation of financial statements to update certain accounts so that they reflect correct balances on the following period.

Financial transactions affect the revenues and expenses of more than one accounting period which necessitates the adjustment of accounts.

Adjusting entries are made to ensure that assets, liabilities, income, and expenses have correct balances at the end of the accounting period.

Prior to recording adjusting entries at the end of an accounting period, some accounts may not show proper financial statement amounts even though all transactions were correctly recorded.

Adjusting entries are required

every time financial statements are prepared.

every time a meeting of the board of directors is scheduled

every time management needs to review the financial results.

Which of the statements below confirm with the accrual basis of accounting for revenues?

A sale is complete when title to the goods passes to the customer or when the service is provided.

For sales on account, revenue is recognized when the sale occurs even and when cash has been collected.

Revenue is considered earned and recognized when goods have been paid for by the customer.

Advance collection before services or goods are delivered is an example of accrued income.

Failure to adjust for the accrued income at the end of the period would result in

Understated profit and understated asset.

Understated profit and overstated asset.

Overstated profit and understated asset.

Overstated profit and overstated asset.

Adjustment for accrued revenue should

Increase assets and increase revenues

Decrease assets and decrease revenues

Decrease liabilities and increase revenues

Increase liabilities and decrease revenues

Accrued interest income is presented as

Current asset in the Statement of Financial Position.

Operating expense in the Statement of Profit or Loss.

Current liability in the Statement of Financial Position.

Other operating income in the Statement of Profit or Loss.

An adjusting entry made to record accrued interest in the current year on a note payable due next year consists of

Debit to Interest Expense and credit to Interest Payable

Debit to Interest Expense and credit to Cash

Debit to Interest Expense and credit to Notes Payable

Debit to Interest Receivable and credit Interest Incom

The adjusting entry to account for the expiration of prepaid insurance which was initially recorded under the asset method consists of

a debit to Insurance Expense and a credit to Prepaid Insurance Expense.

a debit to Accumulated Depreciation and a credit to Prepaid Insurance Expense.

a debit to Prepaid Insurance Expense and a credit to Accumulated Depreciation.

a debit to Insurance Expense and a credit to Accumulated Depreciation.

If the prepaid expense which was initially recorded under the asset method is not adjusted, assets on the Statement of Financial Position

may be either overstated or understated.

Supplies was initially purchased and recorded under the asset method, the adjusting entry to account for the use of the supplies consists of

a debit to Supplies Expense and a credit to Supplies.

a debit to Supplies and a credit to Accumulated Depreciation.

a debit to Supplies and a credit to Supplies Expense.

a debit to Accumulated Depreciation and a credit to Supplies.

The following are usual causes of depreciation, EXCEPT

Non-payment of a long-term asset purchased on account

Business expansion or government regulations such that the asset although in good condition can no longer fulfil the needs of the business

Wear and tear due to normal usage

Which of the following entries records the depreciation on equipment for the fiscal year-end adjustment?

Debit Depreciation Expense; credit Accumulated Depreciation

Debit Accumulated Depreciation; credit Depreciation Expense

Debit Depreciation Expense; credit Equipment

Debit Depreciation; credit Depreciation Expense

Which of the following statements is FALSE?

Salvage value is computed by subtracting the accumulated depreciation from the cost of a long-term asset.

The carrying amount of a long-term asset is reduced each year as depreciation is recorded.

Generally accepted accounting principles require that the original cost of a long-term asset continue to appear in the asset account until the disposal of the asset.

Buildings and trucks are examples of long-term assets.

What happens if a company fails to record estimated Doubtful Accounts Expense?

Net realizable value of accounts receivable is understated.

Gross receivables are understated.

This method of estimating uncollectible accounts classifies accounts receivable according to how long they have been outstanding

Percentage of accounts receivable

Which of the following transactions dated at year-end will increase a merchandising company’s total net realizable value of Accounts Receivable?

Collection of accounts receivable beyond discount period

Receipt of promissory note to replace an overdue accounts receivable

Collection of interest from an interest-bearing note

QUIZ 3 ADJUSTING ENTRIES

Authored by Alyanna Dy

Mathematics

University

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In accrual accounting, accrued revenues are recorded as liabilities.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Under the accrual basis of accounting, revenues and expenses are recognized and recorded in the period only when there is a transfer of cash.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Before an adjusting entry is made to accrue employee salaries, Salaries Expense and Salaries Payable are both understated.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Adjusting entries are done to update certain accounts so that they reflect correct balances at the end of an accounting period.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Net profit for a period will be overstated if accrued expense is not recorded at the end of the accounting period.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

An expense – liability relationship exists with accrued expense adjusting entries.

True

False

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

True

False

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QUIZ 3 ADJUSTING ENTRIES

In accrual accounting, accrued revenues are recorded as liabilities.

Under the accrual basis of accounting, revenues and expenses are recognized and recorded in the period only when there is a transfer of cash.

Before an adjusting entry is made to accrue employee salaries, Salaries Expense and Salaries Payable are both understated.

Adjusting entries are done to update certain accounts so that they reflect correct balances at the end of an accounting period.

Net profit for a period will be overstated if accrued expense is not recorded at the end of the accounting period.

An expense – liability relationship exists with accrued expense adjusting entries.

Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

Accrued revenues at the end of one accounting period are expected to result in cash payments in a future period.

Earned but uncollected revenues are recorded during the adjusting process with a debit to an expense and a credit to a revenue.

Accrued revenues are amounts that have been received but not yet entered in the accounting records.

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