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Adjusting Entries

40 Questions
Accounting Quizzes & Trivia

Online quiz number 1

Questions and Answers
  • 1. 
    Which of the following is/are a purpose of adjusting entries?
    • A. 

      To update the accounts in the books

    • B. 

      To apply the matching principle

    • C. 

      To properly reflect the the correct net income

    • D. 

      To make the equation A=L+OE more accurate

    • E. 

      All of the above

  • 2. 
    Which of the following is an adjunct account?
    • A. 

      Purchase Returns and Allowances

    • B. 

      Sales Returns and Allowances

    • C. 

      Accumulated Depreciation

    • D. 

      Premium on Bonds

    • E. 

      Purchase Discount

  • 3. 
    ________ It is defined as the systematic allocation of the cost of an asset over its useful life.
  • 4. 
    When using the periodic inventory system, the main reason for the adjusting the asset account Merchandise Inventory in two steps is
    • A. 

      To record an accurate amount of inventory on the balance sheet

    • B. 

      That both the beginning and ending inventory amounts must appear as separate figures on the income statement.

    • C. 

      To make adjustments for losses due to error, shrinkage or theft

    • D. 

      All of these

    • E. 

      None of these

  • 5. 
    The second adjusting entry for merchandise inventory under the periodic system, is 
    • A. 

      Debit Income Summary and credit Merchandise Inventory

    • B. 

      Debit Merchandise Inventory and credit Income Summary

    • C. 

      Debit Cost of Goods Sold and credit Merchandise Inventory

    • D. 

      Debit Merchandise Inventory and credit Cost of Goods Sold

    • E. 

      None of the above

  • 6. 
    True or False. Under a perpetual inventory system, there is no need to conduct a physical inventory count
    • A. 

      True

    • B. 

      False

  • 7. 
    The Unearned Revenue account is listed in the 
    • A. 

      Statement of Financial Performance

    • B. 

      Statement of Financial Position

    • C. 

      Bank Statement

    • D. 

      Statement of Changes in Equity

    • E. 

      Cash Flow Statement

  • 8. 
    In the adjustments column of the worksheet, the debit to the Merchandise Inventory account represents
    • A. 

      Beginning inventory

    • B. 

      Ending inventory

    • C. 

      The difference between the beginning and ending inventory

    • D. 

      The total of the beginning and ending inventory

    • E. 

      None of these

  • 9. 
    What is the purpose of the adjusting entry under the Expense Method?
    • A. 

      To record the unused portion of the asset.

    • B. 

      To record the expired portion of the asset

    • C. 

      To record the purchase of the asset

    • D. 

      All of the above

    • E. 

      None of the Above

  • 10. 
    What it the purpose of the adjusting entry under the Liability Method?
    • A. 

      To record the earned portion of the revenue received in advance.

    • B. 

      To record the unearned portion of the revenue received in advance.

    • C. 

      To record the receipt of the cash

    • D. 

      All of the above

    • E. 

      None of the above

  • 11. 
    The net increase in owner's equity that results from business operations is called:
    • A. 

      Net income

    • B. 

      Revenue

    • C. 

      An expense

    • D. 

      An asset

  • 12. 
    In general, the accounts in the income statement are
    • A. 

      Permanent accounts

    • B. 

      Temporary accounts

    • C. 

      Unearned revenue accounts

    • D. 

      Contra-asset account

  • 13. 
    A business can choose a fiscal year that corresponds to
    • A. 

      The calendar year

    • B. 

      The natural business year

    • C. 

      Any twelve-month period

    • D. 

      Any of the above

    • E. 

      A and C only

  • 14. 
    Assigning revenues to the accounting period in which goods are delivered or services performed and expenses to the accounting period in which they are used to produce revenues is called the
    • A. 

      Accounting period

    • B. 

      Continuity assumption

    • C. 

      Matching rule

    • D. 

      Recognition rule

  • 15. 
    • A. 

      Recording all revenues when cash was received

    • B. 

      Applying the matching rule

    • C. 

      Recognizing expense when incurred

    • D. 

      Adjusting the accounts

    • E. 

      All of the above

  • 16. 
    Which of the following is an example of a deferral?
    • A. 

      Apportioning costs between two or more periods

    • B. 

      Recognizing an accrued expense

    • C. 

      Recognizing an unearned revenue

    • D. 

      Recognizing an accrued revenue

    • E. 

      All of the above

  • 17. 
    Adjusting entries are used to
    • A. 

      Make financial statements from one period to the next more comparable

    • B. 

      Make net income reflect cash flow

    • C. 

      Correct errors in the recording of earlier transactions

    • D. 

      Record initial transactions

    • E. 

      None of the above

  • 18. 
    The adjusted trial balance is a list of accounts and their balances at
    • A. 

      The beginning of the accounting period

    • B. 

      The end of the accounting period

    • C. 

      The end of the accounting period immediately after adjusting entries have been posted

    • D. 

      Any point during the accounting period

    • E. 

      The end of the accounting period immediately before adjusting entries have been posted

  • 19. 
    A purchase of office supplies that was recorded in the Office Equipment account would require a correcting entry that
    • A. 

      Credits Office Supplies

    • B. 

      Credits Cash

    • C. 

      Debits Office Equipment

    • D. 

      Credits Office Equipment

    • E. 

      None of the above

  • 20. 
    The time period assumption states that:
    • A. 

      Revenue should be recognized in the accounting period in which it is earned

    • B. 

      Expenses should be matched with revenues

    • C. 

      The economic life of a business can be divided into artificial time periods

    • D. 

      The fiscal year should correspond with the calendar year

    • E. 

      Same definition with accrual accounting

  • 21. 
    The principle which dictates that efforts be matched with accomplishments is the:
    • A. 

      Matching principle

    • B. 

      Cost principle

    • C. 

      Periodicity principle

    • D. 

      Revenue recognition principle

    • E. 

      None of the above

  • 22. 
    Adjusting entries are made to ensure that:
    • A. 

      Expenses are recognized in the period in which they are incurred

    • B. 

      Revenues are recorded in the period on which they are earned

    • C. 

      Balance sheet and income statement accounts have correct balances at the end of the accounting period

    • D. 

      All of the above

    • E. 

      Only a and b

  • 23. 
    Each of the following is major type (category) of adjusting entries, except:
    • A. 

      Prepaid expenses

    • B. 

      Accrued revenues

    • C. 

      Accrued expenses

    • D. 

      Earned revenues

    • E. 

      None of the above

  • 24. 
    Adjustments for unearned revenues:
    • A. 

      Decrease liabilities and increase revenues

    • B. 

      Have an assets and revenues account relationship

    • C. 

      Increase assets and increase revenues

    • D. 

      Decrease revenues and decrease assets

    • E. 

      B and d

  • 25. 
    Adjustments for accrued revenues:
    • A. 

      Have a liabilities and revenues account relationship

    • B. 

      Have an assets and revenues account relationship

    • C. 

      Decrease assets and revenues

    • D. 

      Decrease liabilities and increase revenues

    • E. 

      C and d

  • 26. 
    One of the following statements about the accrual basis of accounting is false. That statement is/are:
    • A. 

      Events that change a company's financial statements are recorded in the period i which the event's occur

    • B. 

      Revenue is recognized in the period in which it is earned

    • C. 

      This is basis is in accord with generally accepted accounting principles (GAAP)

    • D. 

      Revenue is recorded only when cash is received, and expense is recorded only when cash is paid

    • E. 

      A, b and c

  • 27. 
    • A. 

      True

    • B. 

      False

  • 28. 
    The second adjusting entry for merchandise inventory, when using the periodic inventory system, causes a zero balance in the Merchandise Inventory account
    • A. 

      True

    • B. 

      False

  • 29. 
    • A. 

      True

    • B. 

      False

  • 30. 
    • A. 

      True

    • B. 

      False

  • 31. 
    A contra asset account is an account that is added to another asset account
    • A. 

      True

    • B. 

      False

  • 32. 
    • A. 

      True

    • B. 

      False

  • 33. 
    If adjusting entries are recorded in the worksheet, there is no need for them to be journalized or posted
    • A. 

      True

    • B. 

      False

  • 34. 
    ______is equal to Net sales minus cost of goods sold
  • 35. 
    _______is the merchandise a company owns and expects to sell to customers
  • 36. 
    The minor expense of a merchandiser is cost of goods sold
    • A. 

      True

    • B. 

      False

  • 37. 
    Cost of goods sold is equal to:
    • A. 

      Beginning inventory + purchases - ending inventory

    • B. 

      Beginning inventory - purchases - ending inventory

    • C. 

      Beginning inventory + purchases + ending inventory

    • D. 

      Beginning inventory - purchases + ending inventory

  • 38. 
    Under the periodic inventory system entries to the inventory account are made:
    • A. 

      When merchandise is purchased

    • B. 

      At year end

    • C. 

      When merchandise is sold

    • D. 

      When merchandise is returned

  • 39. 
    Reduction in a receivable or a payable that is granted if it is paid within the discount period
    • A. 

      Cash discount

    • B. 

      Trade discount

    • C. 

      Discount

    • D. 

      None of the above

    • E. 

      A and b is the same

  • 40. 
    Purchaser's description of a cash discount received from a supplier of goods
    • A. 

      Cash discount

    • B. 

      Sales discount

    • C. 

      Purchase discount

    • D. 

      All of the above

    • E. 

      A and b