NEW
Font size
WorksheetsMAB1033 Adjusting Entries
Total questions: 10
Worksheet time: 10mins
Which of the following statements about the need for adjustments is not correct?
Without adjustments, the financial statements present an incomplete and misleading picture of the company.
Adjusting entries are intended to change the operating results to reflect management's objectives for operating performance.
Adjustments help the financial statements present the best picture of whether the company's activities were profitable for the period.
Adjustments help the financial statements present the economic resources that the company owns and owes at the end of the period.
One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:
ensure that revenues and expenses are recognized during the period they are earned and incurred.
ensure that all estimates of future activities are eliminated from consideration.
ensure that revenues and expenses are recognized conservatively during the period in which they are paid.
provide an opportunity to manipulate the numbers to the best advantage of the reporting company.
Adjusting entries are typically prepared:
at the beginning of the accounting period.
at the end of the accounting period.
on a daily basis.
on a weekly basis.
If certain assets are partially used up during the accounting period, then:
nothing is recorded on the financial statements until they are completely used up.
a liability account is decreased and an expense is recorded.
an asset account is decreased and an expense is recorded.
nothing is recorded on the financial statements until they are replaced or replenished.
The company uses up $5,000 of an existing asset and the company adjusts its accounts accordingly. This is an example of a(n):
accrual adjustment.
closing adjustment.
deferral adjustment.
unethical adjustment.
The term deferral best describes a situation in which:
cash is paid in advance of recognizing an expense.
an expense is recognized before it is paid for with cash.
an expense is recognized after cash has been received.
a liability is established at the time an expense is recognized.
At the end of the year, accrual adjustments could include a:
debit to an expense and a credit to an asset.
credit to revenue and a debit to an expense.
debit to cash and a credit to Common Stock.
debit to an asset and a credit to a revenue.
Accrual adjustments involve increasing:
assets and revenues or increasing liabilities and expenses.
assets and expenses or increasing liabilities and revenues.
assets and decreasing revenues or increasing liabilities and decreasing expenses.
assets and decreasing expenses or increasing liabilities and decreasing revenues.
Accrued revenues recorded at the end of the current year:
often result in cash receipts from customers in the next period.
often result in cash payments in the next period.
are also called Deferred Revenues.
are recorded in the current year when cash is received.
What is the main difference between accrual and deferral adjustments?
Deferral adjustments are required to update previously recorded items whereas accrual adjustments are required to include items not previously recorded.
Deferral adjustments are required under the cash basis of accounting whereas accrual adjustments are required under the accrual basis of accounting.
Deferral adjustments are required to include items not previously recorded whereas accrual adjustments are required to update previously recorded items.
Deferral adjustments are used for expenses whereas accrual adjustments are used for revenues.
