Question 1

The company uses up $5,000 of an existing asset and the company adjusts its accounts accordingly.This is an example of a(n):

Accepted Answer

This is an example of a deferral adjustment, as the company is adjusting the accounts for the use of an existing asset.

Question 2

A company owes rent at a rate of $6,000 per month.The company pays the rent owed on the tenth of each month for the previous month.At the end of each month,what kind of adjustment is required?

Accepted Answer

The company is paying for the rent owed for the previous month on the tenth of the current month. This means that at the end of each month, there is an expense that has been incurred but has not been paid for yet. This is an example of an accrual adjustment, where the expense is recognized in the period it was incurred even though the payment will be made in the following period.

Question 3

Which of the following statements about the need for adjustments is not correct?

Accepted Answer

Adjusting entries are not intended to change the operating results to reflect management's objectives for operating performance. Instead, they are intended to ensure that the financial statements are accurate and complete by recording all revenues earned and expenses incurred during the period and adjusting balances of assets and liabilities to reflect their current values.

Question 4

What is the main difference between accrual and deferral adjustments?

Accepted Answer

The answer of What is the main difference between accrual...

Question 5

An example of an account that could be included in an accrual adjustment for expense is:

Accepted Answer

Accrual adjustments are made to record expenses or revenues that have been incurred but not yet recorded. Interest payable is an example of an expense that may have been incurred but not yet recorded, and would require an accrual adjustment to properly reflect it in the financial statements. Accounts Receivable, Prepaid Insurance, and Accumulated Depreciation are not examples of expenses that require accrual adjustments.

Question 6

Which of the following best describes when an accrual adjustment is required?

Accepted Answer

Accrual adjustments are required when expenses have been incurred but not yet paid in cash. This is because accrual accounting matches revenue and expenses to the period in which they are earned or incurred, rather than when cash is exchanged.

Question 7

Which of the following statements about adjustments is correct?

Accepted Answer

The answer of Which of the following statements about adjustments...

Question 8

Adjusting entries are typically prepared:

Accepted Answer

Adjusting entries are typically prepared at the end of the accounting period to ensure that the financial statements reflect the true financial position of the company. This is necessary to account for any transactions that occurred but were not yet recorded, such as accrued expenses or unearned revenue. Adjusting entries help to ensure that the income statement and balance sheet accurately reflect the company's financial position.

Question 9

Accrued revenues recorded at the end of the current year:

Accepted Answer

Accrued revenues recorded at the end of the current year are revenues that have been earned but not yet received in cash. Therefore, they often result in cash receipts from customers in the next period.

Question 10

When a deferral adjustment is made to an asset account,that asset becomes a(n):

Accepted Answer

When a deferral adjustment is made to an asset account, it typically means that the asset has been used up or consumed, and it is recognized as an expense.

Question 11

When existing assets are used up in the ordinary course of business:

Accepted Answer

When existing assets are used up in the ordinary course of business, it represents a consumption of resources that have already been acquired and accounted for as assets. Thus, this consumption is recognized as an expense in the period in which it occurs.

Question 12

If an expense has been incurred but will be paid later,then:

Accepted Answer

When an expense has been incurred but will be paid later, it creates a liability for the company. Therefore, a liability account is created or increased and an expense is recorded. This ensures that the financial statements accurately reflect the company's financial obligations.

Question 13

If certain assets are partially used up during the accounting period,then:

Accepted Answer

When certain assets are partially used up during the accounting period, an adjusting entry is made to decrease the asset account and record the expense associated with the portion of the asset that has been used up. This process is known as depreciation. Choice A and D are incorrect because assets are recorded on the financial statements even if they are partially used up. Choice B is incorrect because liability accounts are not typically affected by depreciation.

Question 14

The term,deferral,best describes a situation in which:

Accepted Answer

The answer of The term,deferral,best describes a situation in which:
...

Question 15

An example of an account that could be included in an accrual adjustment for revenue is:

Accepted Answer

Interest Receivable is an account that represents revenue earned but not yet received, making it suitable for an accrual adjustment.

Question 16

Accrual adjustments involve increasing:

Accepted Answer

Accrual adjustments involve increasing either assets and revenues or increasing liabilities and expenses. This is necessary to properly match revenue and expenses to the period in which they were earned or incurred, even if the actual funds have not been received or paid out yet.

Question 17

At the end of the year,accrual adjustments could include a:

Accepted Answer

Accrual adjustments at the end of the year typically involve recognizing expenses that have been incurred but not yet paid or recorded. This would result in a debit to an expense account, and a credit to a liability account. Therefore, option D is the correct choice. Option A is incorrect as it involves a credit to an asset which is not typical of accrual adjustments. Option B is incorrect as it involves a credit to revenue which typically indicates earned revenue and not accrued revenue. Option C is incorrect as it involves a debit to cash which is not typical of accrual adjustments.

Question 18

A company makes a deferral adjustment that decreased a liability.This must mean that a(n):

Accepted Answer

The answer of A company makes a deferral adjustment that...

Question 19

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

Accepted Answer

Making adjustments to improve the quality of financial statements ensures that revenues and expenses are recognized during the period they are earned and incurred, which helps to provide users of financial statements with more accurate and reliable information. This is a fundamental principle of accrual accounting. Option B is incorrect because some estimates are necessary and cannot be eliminated. Option C is incorrect, as the principle of conservatism does not require recognition of expenses that have not been incurred. Option D is incorrect because manipulating numbers to the best advantage of the reporting company would be unethical and would not improve the quality of financial statements.

Question 20

One major difference between deferral and accrual adjustments is that deferral adjustments:

Accepted Answer

Deferral adjustments involve previously recorded assets and liabilities, such as prepaid expenses or unearned revenue, while accrual adjustments involve previously unrecorded assets and liabilities, such as accrued expenses or revenue earned but not yet received.

Quiz 4: Adjustments,financial Statements,and Financial Results

The company uses up $5,000 of an existing asset and the company adjusts its accounts accordingly.This is an example of a(n) :