Statement 1: The adjusting entry to recognize earned revenues that were received in advance will cause total liabilities to decrease. Statement 2: Failure to record the adjusting entry for depreciation results in assets and owner's equity being understated on the balance sheet. Only Statement 1 is correct. Only Statement 2 is correct. Both statements are correct. Both statements are incorrect.

Statement 1: The adjusting entry to recognize earned revenues that were received in advance will cause total liabilities to decrease. Statement 2: Failure to record the adjusting entry for depreciation results in assets and owner's equity being understated on the balance sheet. Only Statement 1 is correct. Only Statement 2 is correct. Both statements are correct. Both statements are incorrect.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter3: Accrual Accounting

Section: Chapter Questions

Problem 4MCQ: Which of the following statements is false? Adjusting entries are necessary because timing...

See similar textbooks

Similar questions

Analyze Trusty Companys trial balance and the additional information provided to determine the following: A. what is causing the trial balance to be out of balance B. any other errors that require corrections that are identified during your analysis C. the effect (if any) that correcting the errors will have on the accounting equation A review of transactions revealed the following facts: A service fee of $18,000 was earned (but not yet collected) by the end of the period but was accidentally not recorded as revenue at that time. A transposition error occurred when transferring the account balances from the ledger to the trial balance. Salaries expense should have been listed on the trial balance as $64,500 but was inadvertently recorded as $46,500. Two machines that cost $9,000 each were purchased on account but were not recorded in company accounting records.
Which of the following statements is false? Adjusting entries are necessary because timing differences exist between when a revenue or expense is recognized and cash is received or paid. Adjusting entries always affect at least one revenue or expense account and one asset or liability account. The cash account will always be affected by adjusting journal entries. Adjusting entries can be classified as either accruals or deferrals.
Which of the following adjusting entries involves the recognition of an accrued expense? a. recording depreciation on a long-lived asset b. writing off the portion of an insurance policy that has expired c. recognition of salaries owed to employees for work done during the current period that will be paid during the next accounting period d. recognition of bad debt losses that are expected to result from making sales on credit terms
Which of the following errors would cause the BalanceSheet and Statement of Owner’s Equity columns of a worksheet to be out of balance? a. Entering a revenue amount in the Balance Sheet and Statement of Owner’s Equity Debit column. b. Entering a liability amount in the Balance Sheet and Statement of Owner’s Equity Credit column. c. Entering an expense amount in the Balance Sheet and Statement of Owner’s Equity Debit column. d. Entering an asset amount in the Income Statement Debit column. e. Entering a liability amount in the Income Statement Credit column.
If the effect of the credit portion of an adjusting entry is to increase the balance of a revenue account, which of the following describes the effect of the debit portion of the entry? increases the balance of a stockholders' equity account increases the balance of a contra revenue account decreases the balance of a liability account decreases the balance of an asset account
Which of the following is not a characteristic of adjusting entries? a. Reduce the balances of revenue, expense, and dividend accounts to zero. b. Allow for proper recognition of revenues and expenses. c. Are part of accrual-basis accounting. d. Are recorded at the end of the accounting period.
1. Which of the following statements is FALSE?A. Account titles in the chart of accounts are usually arranged alphabetically.B. Assets are classified as current and non-current.C. Land is not subject to depreciation.2. Which of the following statements is FALSE?A. Current liabilities are expected to be settled within twelve months.B. Liabilities must be equal to the sum of assets and owner's equity.C. Accounts payable is a current liability.D. Unearned revenue is a liability.
The accountant of Newton Legal Services failed to make an adjusting entry for supplies that had been used for the year. Assume the supplies were initially recorded as an asset. Which of the following statements is true? A. The total assets will be understated. B. The total assets will be overstated. C. The equity will be understated. D. The total liabilities will be overstated.
Which of the following is NOT an accounting method that would increase the current ratio (currently 2:1)? a. Not adjusting prepaid insurance at year end b. Recognising unearned revenue as revenue c. Not recognising accrued wages d. Changing the method of depreciation
Under the allowance method of uncollectible accounts, the entry to write off a customer’s account affects the accounting equation by: decreasing an asset and decreasing stockholders’ equity (expense) increasing an asset and decreasing an asset increasing a liability and decreasing a liability decreasing a liability and increasing stockholders’ equity (revenue)
The Accountant for the a Company forgot to make an adjusting entry to record depreciation for the current year. The effect of this error would be: a An overstatement of net income and an understatement of assets. b An overstatement of assets offset by an understatement of owners' equity. c An overstatement of assets, net income, and owners' equity. d An overstatement of assets and of net income and an understatement of owners' equity.
Which of the following statements is false? 1. An income statement reports revenues earned less expenses incurred. 2 An unadjusted trial balance is a list of accounts and balances after adjusting entries have been recorded and posted to the ledger 3. Interim financial reports can be based on a time period shorter than on year, such as a one-month or three-month accounting periods.