Which of the following statements relating to balance day adjustments is correct?
A) They affect either the income statement or the balance sheet.
B) They only affect the income statement.
C) They always affect the cash/bank account.
D) They have at least one effect on the income statement and one effect on the balance sheet.

Question

Quizplus · Accepted Answer

Balance day adjustments can have at least one effect on the income statement (revenue or expense recognition) and one effect on the balance sheet (asset or liability recognition or valuation). They do not necessarily always affect the cash/bank account, so option C is incorrect. Option A is too broad as balance day adjustments can affect both the income statement and the balance sheet. Option B is incorrect as balance day adjustments do not only affect the income statement.

Which of the Following Statements Relating to Balance Day Adjustments