The purchase of fixed assets totalling $ 100 on account was incorrectly recorded as a debit to expense and a credit to O The trial balance will not balance. cash. As a result of this error, which of the following statements is true? O Liabilities would be overstated. O Expenses would be understated O Total assets would be understated

The purchase of fixed assets totalling $ 100 on account was incorrectly recorded as a debit to expense and a credit to O The trial balance will not balance. cash. As a result of this error, which of the following statements is true? O Liabilities would be overstated. O Expenses would be understated O Total assets would be understated

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...

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Would the following errors cause the trial balance to have equal or unequal totals? As a result of the errors, which accounts are overstated (by how much) or understated (by how much)? a. A purchase of office equipment for 380 was recorded as a debit to Office Equipment for 38 and a credit to Cash for 38. b. A payment of 280 to a creditor was debited to Accounts Receivable and credited to Cash for 280 each. c. A purchase of supplies for 245 was recorded as a debit to Equipment for 245 and a credit to Cash for 245. d. A payment of 76 to a creditor was recorded as a debit to Accounts Payable for 76 and a credit to Cash for 67.
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.
1. When an error is discovered after closing the nominal accounts, one of the accounts to be credited or debited is the owner’s capital account. True or False?2. All property, plant and equipment are capitalized. True or False?3. Accrual basis of accounting recognizes sales on credit and collection from accounts receivable. True or false?
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 income
Why is it expected that the initial debit and credit totals of the income statement accounts do not balance on a 10-column worksheet? Select one: a. None of the choices available. b. This is expected because the company should report an asset. c. This is not expected and it shows that there is definitely an error made. d. This is expected because the company should report an income or a loss.
Choose the incorrect statement below:A. Recognition for depreciation under the cash basis of accounting is different from that of the accrual basis of accounting.B. Deferred income is income already received but not yet earned.C. At the end of the accounting period, adjustments are made for accruals and prepayments in order to convert the cash records to accrual records.D. To compute for the sales on account, the beginning balance of trade accounts and notes receivable is deducted from the total of trade accounts and notes receivable, ending balance, collection of trade accounts and notes receivable, sales returns, discounts, and allowances and accounts written off.
Which of the following statements is incorrect? A. The accrual method, which builds directly on the revenue and matching principles, ignores the timing of cash receipts or payments determining when to revenue or expenses. when recognize B. In accordance with the going concern assumption, the life of the business is presumed to be indefinite. C. Expenses are matched with revenues, not the reverse. D. In accordance with the unit of measure assumption, accountants normally revise the amounts to reflect the changing purchasing power of money due to inflation or deflation.
Which statement is incorrect? Under cash basis of accounting, A. revenue is recorded when earnedB. expenses are recorded when paid.C. depreciation expense is recognized.D. bad debts expense is not recognized.E. none of the above
Which of the following statements is correct? Options: • Prepayments of supplies initially recorded as asset will be adjusted at the end of the period as debit to unused supplies the portion that remains unused • Prepayments of interest expense under asset method should be recorded as debit to unearned interest • If unpaid expenses incurred during the accounting period are not accrued, the income for the period will be overstated • There is no provision for depreciation in cash basis accounting because there is no actual cash involved
Which of the following is the postclosing trial balance not designed to verify? Multiple Choice that the expense accounts have zero balances that the drawing accounts have zero balances that the capital accounts have zero balances that total debits equal total credits
Indicate which of the following errors, each considered individually, would cause the trial balance totals to be unequal:a. A fee of $21,000 earned and due from a client was not debited to Accounts Receivable or credited to a revenue account, because the cash had not been received.b. A receipt of $11,300 from an account receivable was journalized and posted as a debit of $11,300 to Cash and a credit of $11,300 to Fees Earned.c. A payment of $4,950 to a creditor was posted as a debit of $4,950 to Accounts Payable and a debit of $4,950 to Cash.d. A payment of $5,000 for equipment purchased was posted as a debit of $500 to Equipment and a credit of $500 to Cash.e. Payment of a cash withdrawal of $19,000 was journalized and posted as a debit of $1,900 to Salary Expense and a credit of $19,000 to Cash.Indicate which of the preceding errors would require a correcting entry.