Master Adjusting Entries: Enhance Your Accounting Skills

Question 1

Which of the following is NOT a type of adjusting entry?

Accepted Answer

Closing entries

Answer

Accrued expenses

Answer

Deferred revenues

Answer

Depreciation

Question 2

What is the main reason for making adjusting entries?

Accepted Answer

To assign revenues and expenses to the correct periods

Answer

To fix mistakes made when recording transactions

Answer

To update the values of assets and liabilities

Answer

To make financial statements easier to read

Question 3

What is the purpose of recording accrued expenses?

Accepted Answer

To record expenses incurred but not yet paid

Answer

To record expenses paid but not yet incurred

Answer

To correct errors in previous accounting entries

Answer

To prepare financial statements for external stakeholders

Question 4

Which of the following accounts is used to record income received but not yet earned?

Accepted Answer

Deferred Revenue

Answer

Prepaid Expenses

Answer

Accumulated Depreciation

Answer

Unamortized Goodwill

Question 5

What is the primary purpose of a reversing entry?

Accepted Answer

To reverse the original adjusting entry

Answer

To update the balances of affected accounts

Answer

To correct errors in the trial balance

Answer

To reduce the net income for the period

Question 6

Which of the following adjusting entries is used to record depreciation?

Accepted Answer

Debit Depreciation Expense, Credit Accumulated Depreciation

Answer

Debit Accumulated Depreciation, Credit Depreciation Expense

Answer

Debit Depreciation Expense, Credit Cash

Answer

Debit Accounts Receivable, Credit Depreciation Expense

Question 7

Which accounting principle allows for approximation and estimation in financial reporting?

Accepted Answer

Materiality Principle

Answer

Accrual Accounting Principle

Answer

Going Concern Principle

Answer

Matching Principle

Question 8

Which of the following transactions would require an adjusting entry?

Accepted Answer

Recording depreciation expense

Answer

Purchasing inventory on credit

Answer

Issuing shares to investors for cash

Answer

Paying off a loan

Question 9

What is the main difference between accrued expenses and deferred expenses?

Accepted Answer

Accrued expenses are recorded in the current period, while deferred expenses are recorded in future periods

Answer

Accrued expenses are paid in cash, while deferred expenses are not

Answer

Deferred expenses are recorded as assets, while accrued expenses are recorded as liabilities

Answer

There is no difference between accrued and deferred expenses

Question 10

What is a primary benefit of regularly preparing adjusting entries?

Accepted Answer

Improved accuracy of financial statements

Answer

Enhanced cash flow management

Answer

Reduced risk of fraud

Answer

Increased shareholder confidence

Question 11

What is the purpose of the trial balance prepared after adjusting entries have been posted?

Accepted Answer

To verify the equality of debits and credits in the ledger

Answer

To summarize the financial status of the business

Answer

To identify potential accounting system errors

Answer

To prepare financial statements

Question 12

Which account type typically does NOT require an adjusting entry?

Accepted Answer

Cash

Answer

Accounts Receivable

Answer

Prepaid Insurance

Answer

Supplies

Question 13

What is a key advantage of using adjusting entries?

Accepted Answer

Ensures the accuracy and currency of financial statements

Answer

Streamlines the accounting process

Answer

Minimizes the likelihood of errors in financial reporting

Answer

Simplifies the preparation of tax returns

Question 14

How do accrued expenses differ from deferred expenses?

Accepted Answer

Accrued expenses are incurred but unpaid, while deferred expenses are paid but unearned

Answer

Accrued expenses are paid but unearned, while deferred expenses are incurred but unpaid

Answer

Accrued expenses are liabilities, while deferred expenses are assets

Answer

Accrued expenses reduce expenses, while deferred expenses increase expenses

Question 15

What is the primary use of a worksheet in the accounting cycle?

Accepted Answer

To prepare the adjusted trial balance

Answer

To close the books

Answer

To prepare the financial statements

Answer

To analyze financial data

Question 16

Which of the following accounts are NOT subject to adjusting entries at the end of an accounting period?

Accepted Answer

Cash and Cash Equivalents

Answer

Prepaid Insurance

Answer

Depreciation Expense

Answer

Unearned Revenue

Question 17

The purpose of recording an adjusting entry for depreciation is to:

Accepted Answer

Recognize the decrease in the asset's value over time

Answer

Increase the asset's carrying amount

Answer

Correct an error in the original recording

Answer

Reduce the company's profit before tax

Question 18

Which of the following is not a type of adjusting entry?

Accepted Answer

Closing

Answer

Accrual

Answer

Deferral

Answer

Prepayment

Question 19

The adjusting entry to record accrued expenses will result in:

Accepted Answer

A decrease in both an expense and a liability account

Answer

An increase in both an expense and an asset account

Answer

A decrease in both a revenue and an asset account

Answer

An increase in both a revenue and a liability account

Question 20

The purpose of adjusting entries for prepaid expenses is to:

Accepted Answer

Recognize the portion of the expense that has been used during the period

Answer

Record the full amount of the expense upfront

Answer

Correct an error in the recording of an expense

Answer

Increase the company's net income

Question 21

The adjusting entry to record accrued revenue will result in:

Accepted Answer

An increase in both a revenue and an asset account

Answer

A decrease in both a revenue and a liability account

Answer

An increase in both an expense and a revenue account

Answer

A decrease in both an expense and a liability account

Question 22

Which of the following is a primary purpose of adjusting entries?

Accepted Answer

To reflect the true financial position of a business

Answer

To correct errors in previous accounting records

Answer

To comply with legal and regulatory requirements

Answer

To facilitate the preparation of financial statements

Question 23

Which of the following is NOT a type of adjusting entry?

Accepted Answer

Cash receipt

Answer

Accrued revenue

Answer

Depreciation

Answer

Prepaid expenses

Question 24

What is the purpose of adjusting for prepaid insurance?

Accepted Answer

To expense the portion of the insurance policy that has expired

Answer

To record the full amount of the insurance policy as an expense

Answer

To increase the balance of the Prepaid Insurance account

Answer

To decrease the balance of the Cash account

Question 25

Which of the following depreciation methods results in the highest depreciation expense in the first year?

Accepted Answer

Double-declining-balance method

Answer

Straight-line method

Answer

Declining-balance method

Answer

Units-of-production method

Question 26

What is the purpose of the allowance for doubtful accounts?

Accepted Answer

To reduce the balance of accounts receivable to its estimated realizable value

Answer

To increase the balance of accounts receivable to its estimated realizable value

Answer

To record the actual amount of bad debts incurred

Answer

To eliminate the risk of uncollectible accounts

Question 27

How do adjusting entries impact the calculation of financial ratios?

Accepted Answer

Adjusting entries can increase or decrease financial ratios.

Answer

Adjusting entries have no effect on financial ratios.

Answer

Adjusting entries only affect ratios that measure profitability.

Answer

Adjusting entries are made after financial ratios are calculated.

Question 28

To ensure accuracy and consistency when making adjusting entries, which best practice is recommended?

Accepted Answer

Use a checklist to ensure all necessary adjusting entries are made.

Answer

Prepare adjusting entries only at the end of the fiscal period.

Answer

Estimate the amounts of adjustments.

Answer

Make adjusting entries in any order.

Question 29

What is the main reason for making adjusting entries?

Accepted Answer

To update the accounting records to the balance sheet date

Answer

To fix mistakes from earlier accounting periods

Answer

To make the business more appealing to investors

Answer

To make accountants' jobs easier

Question 30

Which of the following accounts would require an accrual adjusting entry at the end of the period?

Accepted Answer

Wages Payable

Answer

Cash

Answer

Prepaid Insurance

Answer

Inventory

Question 31

Which of the following adjusting entries would increase an asset and decrease an expense?

Accepted Answer

Interest accrued receivable

Answer

Wages Payable

Answer

Unearned Revenue

Answer

Depreciation expense

Question 32

What is the primary purpose of a worksheet in the adjusting entries process?

Accepted Answer

To汇总 adjustments before posting to the ledger

Answer

To calculate the amount of closing entries needed

Answer

To check the accuracy of the adjusting entries

Answer

To create a new trial balance

Question 33

What is the accounting principle that dictates that expenses be recognized in the same period as the related revenues?

Accepted Answer

Matching principle

Answer

Monetary unit principle

Answer

Going concern principle

Answer

Cost principle

Question 34

What is the primary purpose of financial statements?

Accepted Answer

To provide information about a company's financial position and performance

Answer

To secure loans

Answer

To comply with legal requirements

Answer

To calculate taxes owed

Question 35

What is the fundamental difference between an asset and a liability?

Accepted Answer

An asset represents a resource, while a liability represents an obligation.

Answer

An asset is a current account, while a liability is a non-current account.

Answer

An asset is positive, while a liability is negative.

Answer

An asset increases with a debit, while a liability increases with a credit.

Question 36

To account for expenses incurred but not yet paid, which adjusting entry is recorded at the end of an accounting period?

Accepted Answer

Accrued expenses

Answer

Prepaid expenses

Answer

Depreciation

Answer

Unearned revenue

Question 37

How do adjusting entries affect a company's financial statements?

Accepted Answer

Adjusting entries impact both the balance sheet and income statement.

Answer

Adjusting entries have no impact on financial statements.

Answer

Adjusting entries affect only the balance sheet.

Answer

Adjusting entries affect only the income statement.

Question 38

At the conclusion of an accounting period, which of the following accounts typically requires adjustment?

Accepted Answer

Depreciation Expense

Answer

Cash

Answer

Accounts Receivable

Answer

Inventory

Question 39

The primary purpose of an adjusting entry for accrued expenses is to:

Accepted Answer

Acknowledge expenses that have been incurred but not yet paid.

Answer

Rectify errors made in previous entries.

Answer

Modify the balances of asset accounts.

Answer

Record income received in advance.

Question 40

Which of the following is a typical example of a deferred revenue account?

Accepted Answer

Unearned Rent

Answer

Depreciation Expense

Answer

Supplies on Hand

Answer

Salaries Payable

Question 41

What is the correct form of an adjusting entry for prepaid expenses?

Accepted Answer

Debit Expense, Credit Prepaid Expense

Answer

Debit Prepaid Expense, Credit Expense

Answer

Credit Expense, Debit Prepaid Expense

Answer

Credit Prepaid Expense, Debit Expense

Question 42

Which of the following accurately describes adjusting entries?

Accepted Answer

They are recorded at the end of an accounting period to ensure accurate financial statements.

Answer

They are used solely to rectify errors made in prior entries.

Answer

They are recorded daily to keep accounts up-to-date.

Question 43

The main objective of an adjusting entry for depreciation is to:

Accepted Answer

Distribute the cost of a capital asset over its useful life.

Answer

Record revenue earned but not yet received.

Answer

Correct errors made in a prior period.

Question 44

Which of the following is NOT considered a type of adjusting entry?

Accepted Answer

Closing Entry

Answer

Deferred Revenue

Answer

Accrued Expense

Answer

Prepaid Expense

Question 45

What are the combined effects of an adjusting entry for accrued revenue on the income statement and the balance sheet?

Accepted Answer

Increases revenue and increases an asset

Answer

Decreases revenue and increases an asset

Answer

Decreases revenue and decreases an asset

Answer

Increases revenue and decreases an asset

Question 46

The purpose of preparing a trial balance after adjusting entries is to:

Accepted Answer

Verify the equality of debits and credits

Answer

Prepare the financial statements

Answer

Summarize transactions for the period

Question 47

Which of the following is NOT a type of adjusting entry used to record transactions that have occurred but have not been recorded in the accounting records?

Accepted Answer

Closing entry

Answer

Accrual entry

Answer

Reversing entry

Answer

Deferral entry

Question 48

Which of the following accounts is typically adjusted with a deferral entry to allocate the cost of an asset over its useful life?

Accepted Answer

Prepaid Rent

Answer

Accrued Salaries Payable

Answer

Accounts Receivable

Question 49

What is the primary purpose of an accrual adjusting entry?

Accepted Answer

To recognize expenses incurred but not yet paid or revenue earned but not yet received.

Answer

To reverse adjusting entries made in previous periods.

Answer

To correct errors made in previous periods.

Question 50

Which of the following is an example of a reversing entry used to reverse the accrual of expenses that will be paid in the next period?

Accepted Answer

To reverse the accrual of accrued salaries payable

Answer

To close revenue and expense accounts at the end of the period

Answer

To record depreciation expense for the period

Answer

To adjust prepaid insurance for the expired portion

Question 51

What is the key difference between an adjusting entry and a closing entry?

Accepted Answer

Adjusting entries are prepared before closing entries, to ensure the accuracy of the financial statements.

Answer

Adjusting entries affect balance sheet accounts only.

Answer

Closing entries affect income statement accounts only.

Answer

Closing entries are prepared before adjusting entries.

Question 52

Which accounting principle is most closely associated with the concept of adjusting entries, ensuring that expenses are matched with the revenues they generate?

Accepted Answer

Matching principle

Answer

Going concern principle

Answer

Cost principle

Answer

Materiality principle

Question 53

What is the purpose of adjusting unearned revenue, an account that represents payments received in advance for services not yet performed?

Accepted Answer

To recognize the portion of unearned revenue earned during the period, matching it with the related expenses.

Answer

To defer revenue earned in the future

Answer

To correct errors in previous accounting periods