If the adjustment for prepaid expenses is not recorded a.assets will be understated. b.net income will be overstated. c.expenses will be overstated.
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- The Effect of Ignoring Adjusting Entries on Net Income For each of the following independent situations, determine whether the effect of ignoring the required adjusting entry will result in an understatement (U), will result in an overstatement (O), or will have no effect (NE) on net income for the period.Describe the effect on the financial statements when an adjustment is prepared that records (a) unrecorded revenue and (b) unrecorded expense.Salaries owed but not yet paid is an example of which of the following? A. accrued expense B. accrued revenue C. deferred expense (prepaid expense) D. deferred revenue (unearned revenue)
- Services were performed but not billed. What effect will this have on the income statement if an adjusting entry is not made? a. Liabilities will be understated.b. Expenses will be overstated.c. Net income will be understated.d. Revenues will be overstated.If the adjusting entry is not made for unearned revenues, the result will be: A. Overstate assets and understate liabilities B. Overstate liabilities and understate revenue C. Understate net income and overstate owner’s equity D. Understate owner’s equity and overstate revenueIf a company doesn’t make adjusting entry for accrued expenses: Liabilities will be overstated; expenses and net income will be understated. Liabilities, expenses and net income will be overstated. Liabilities; expenses and net income will be understated. Liabilities and expenses will be understated, net income will be overstated.
- Failure to prepare an adjusting entry at the end of the period to record an accured expense would casue: (Choose all of the correct ones) A. An understatement of libailities B. An overstatement of revenue C. An understatement of expenses D. An overstatement of net income E. An overstatement of assetsBy matching revenues and expenses in the same period in which they incur A. net income or loss will always be underestimated B. net income or loss will always be overestimated C. net income or loss will be properly reported on the income statement D. net income or loss will not be determinedWhich of the following statements is incorrect? A. Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities. B. Accrued expenses and accrued revenues involve assets and liabilities that had 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.
- If an expense has been incurred but not yet recorded, the adjusting entry would involve: a. A liability and an asset b. liability and a revenue c. An expense and an asset d. An asset and a revenue Which statement is not true about accrual and deferral? a. An accrued expense is an amount not paid and currently matched with earnings.b. A prepaid expense is an amount paid and not currently matched with earnings.c. An accrued income is an amount not collected and currently matched with expenses.d. A deferred income is an amount collected and currently matched with expenses. An entity is a resort located in Palawan. The entity collects cash when guests make a reservation. During December 2020, the entity collected P600,000 of cash and recorded the receipt by recognizing unearned revenue. The entity had earned one-third of this amount and the other two-thirds will be earned during January 2021. What is the impact of the adjusting entry on December 31, 2020? a. 400,000 increase in equity…If a company fails to make an adjusting entry to estimate uncollectible accounts, then this error: A understates assets B understates owners equity C overstates experise D overstates net incomeWhich of the following statements is incorrect? A. Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities. B. Accrued expenses and accrued revenues involve assets and liabilities that had 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.Adj usting entries affect only balance sheet accounts.
