WorksheetsAccounting Adjustments Quiz
Total questions: 41
Worksheet time: 1hrs 21mins
The revenue recognition principle states that:
revenue should be recognized in the accounting period in which a performance obligation is satisfied.
expenses should be matched with revenues.
the economic life of a business can be divided into artificial time periods.
the fiscal year should correspond with the calendar year.
The time period assumption states that:
companies must wait until the calendar year is completed to prepare financial statements.
companies use the fiscal year to report financial information.
the economic life of a business can be divided into artificial time periods.
companies record information in the time period in which the events occur.
Which of the following statements about the accrual basis of accounting is false?
Events that change a company’s financial statements are recorded in the periods in which the events occur.
Revenue is recognized in the period in which services are performed.
The accrual basis is in accord with IFRS.
Revenue is recorded only when cash is received, and expense is recorded only when cash is paid.
The principle or assumption dictating that efforts (expenses) be matched with accomplishments (revenues) is the:
expense recognition principle.
cost assumption.
time period principle.
revenue recognition principle.
Adjusting entries are made to ensure that:
expenses are recognized in the period in which they are incurred.
revenues are recorded in the period in which services are provided.
statement of financial position and income statement accounts have correct balances at the end of an accounting period.
All the responses above are correct.
Each of the following is a major type (or category) of adjusting entries except:
prepaid expenses.
accrued revenues.
accrued expenses.
recognized revenues.
The trial balance shows Supplies $1,350 and Supplies Expense $0. If $600 of supplies are on hand at the end of the period, the adjusting entry is:
Supplies 600 Supplies Expense 600
Supplies 750 Supplies Expense 750
Supplies Expense 750 Supplies 750
Supplies Expense 600 Supplies 600
Adjustments for prepaid expenses:
decrease assets and increase revenues.
decrease expenses and increase assets.
decrease assets and increase expenses.
decrease revenues and increase assets.
Accumulated Depreciation is:
a contra asset account.
an expense account.
an equity account.
a liability account.
Queenan Company computes depreciation on delivery equipment at $1,000 for the month of June. The adjusting entry to record this depreciation is as follows.
Accumulated Depreciation—Queenan Company 1,000 Depreciation Expense 1,000
Depreciation Expense 1,000 Equipment 1,000
Depreciation Expense 1,000 Accumulated Depreciation—Equipment 1,000
Equipment Expense 1,000 Accumulated Depreciation—Equipment 1,000
Adjustments for unearned revenues:
decrease liabilities and increase revenues.
have an assets and revenues account relationship.
increase assets and increase revenues.
decrease revenues and decrease assets.
Adjustments for accrued revenues:
have a liabilities and revenues account relationship.
have an assets and revenues account relationship.
decrease assets and revenues.
decrease liabilities and increase revenues.
Kathy Siska earned a salary of R$400 for the last week of September. She will be paid on October 1. The adjusting entry for Kathy’s employer at September 30 is:
No entry is required.
Salaries and Wages Expense 400 Salaries and Wages Payable 400
Salaries and Wages Expense 400 Cash 400
Salaries and Wages Payable 400 Cash 400
Which of the following statements is incorrect concerning the adjusted trial balance?
An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made.
The adjusted trial balance provides the primary basis for the preparation of financial statements.
The adjusted trial balance lists the account balances segregated by assets and liabilities.
The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.
The trial balance shows Supplies $0 and Supplies Expense $1,500. If $800 of supplies are on hand at the end of the period, the adjusting entry is:
Debit Supplies $800 and credit Supplies Expense $800.
Debit Supplies Expense $800 and credit Supplies $800.
Debit Supplies $700 and credit Supplies Expense $700.
Debit Supplies Expense $700 and credit Supplies $700.
Neutrality is an ingredient of:
Faithful Representation Relevance
Yes Yes
No No
Yes No
Which item is a constraint in financial accounting?
Comparability.
Materiality.
Cost.
Consistency.
How does the time period assumption affect an accountant’s analysis of business transactions?
Explain the terms fiscal year, calendar year, and interim periods.
Define two IFRS principles that relate to adjusting the accounts.
Gabe Corts, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Corts’ law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
Why do accrual-basis financial statements provide more useful information than cash-basis statements?
In completing the engagement in Question 3, Corts pays no costs in March, $2,200 in April, and $2,500 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?
“Adjusting entries are required by the historical cost principle of accounting.” Do you agree? Explain.
Why may a trial balance not contain up-to-date and complete financial information?
Distinguish between the two categories of adjusting entries, and identify the types of adjustments applicable to each category.
What is the debit/credit effect of a prepaid expense adjusting entry?
“Depreciation is a valuation process that results in the reporting of the fair value of the asset.” Do you agree? Explain.
Explain the differences between depreciation expense and accumulated depreciation.
Jain Company purchased equipment for Rs18,000,000. By the current statement of financial position date, Rs7,000,000 had been depreciated. Indicate the statement of financial position presentation of the data.
What is the debit/credit effect of an unearned revenue adjusting entry?
A company fails to recognize revenue for services performed but not yet received in cash or recorded. Which of the following accounts are involved in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense? For the accounts selected, indicate whether they would be debited or credited in the entry.
A company fails to recognize an expense incurred but not paid. Indicate which of the following accounts is debited and which is credited in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense.
A company makes an accrued revenue adjusting entry for $900 and an accrued expense adjusting entry for $700. How much was net income understated prior to these entries? Explain.
On January 9, a company pays $6,000 for salaries and wages, of which $2,000 was reported as Salaries and Wages Payable on December 31. Give the entry to record the payment.
For each of the following items before adjustment, indicate the type of adjusting entry (prepaid expense, unearned revenue, accrued revenue, or accrued expense) that is needed to correct the misstatement. If an item could result in more than one type of adjusting entry, indicate each of the types.
One-half of the adjusting entry is given below. Indicate the account title for the other half of the entry.
What is the distinction between comparability and consistency?
Describe the constraint inherent in the presentation of accounting information.
Laurie Belk is president of Better Books. She has no accounting background. Belk cannot understand why fair value is not used as the basis for all accounting measurement and reporting. Discuss.
What is the economic entity assumption? Give an example of its violation.
