Question : 61. Adjusting entries: A. Affect only income statement accounts. B. Affect only balance sheet accounts. C. Affect : 1256827

 

 

61. Adjusting entries: 

A. Affect only income statement accounts.

B. Affect only balance sheet accounts.

C. Affect both income statement and balance sheet accounts.

D. Affect only cash flow statement accounts.

E. Affect only equity accounts.

 

 

62. The main purpose of adjusting entries is to: 

A. Record external transactions and events.

B. Record internal transactions and events.

C. Recognize assets purchased during the period.

D. Recognize debts paid during the period.

E. Correct errors.

 

 

63. The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of thoseexpenses is the: 

A. Recognition principle

B. Cost principle

C. Cash basis of accounting

D. Matching principle

E. Time period principle

 

64. The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called: 

A. Accrual basis accounting

B. Operating cycle accounting

C. Cash basis accounting

D. Revenue recognition accounting

E. Current basis accounting

 

 

65. Which of the following accounts would not be impacted by adjusting journal entries? 

A. Accounts Receivable

B. Consulting Fee Earned

C. Unearned Consulting Fees

D. Cash

E. Wages Payable

 

 

66. The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: 

A. Cash basis accounting

B. The matching principle

C. The time period principle

D. Accrual basis accounting

E. Revenue basis accounting

 

 

67. Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of: 

A. Items that require contra accounts.

B. Items that require adjusting entries.

C. Asset and equity.

D. Asset accounts.

E. Income statement accounts.

 

 

68. The accrual basis of accounting: 

A. Is generally accepted for external reporting since it is more useful for most business decisions.

B. Is flawed because it gives complete information about cash flows.

C. Recognizes revenues when received in cash.

D. Recognizes expenses when paid in cash.

E. Eliminates the need for adjusting entries at the end of each period.

 

 

69. Which of the following statements is incorrect? 

A. Prepaid expenses, depreciation, and unearned revenues involve previously recorded assets and liabilities.

B. Accrued expenses and accrued revenues involve assets and liabilities that were not previously been recorded.

C. Adjusting entries can be used to record both accrued expenses and accrued revenues.

D. Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time.

E. Adjusting entries affect the cash account.

 

70. The recurring steps performed each accounting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, are referred to as the: 

A. Accounting period

B. Operating cycle

C. Accounting cycle

D. Closing cycle

E. Natural business year