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Adjusting Entries MCQs

This document contains 20 multiple choice questions about adjusting entries. Adjusting entries affect both income statement and balance sheet accounts, and are made at the end of an accounting period to allocate revenues and expenses to the proper periods. Examples of adjusting entries include debiting prepaid expenses and crediting expenses, and debiting unearned revenue and crediting revenue. Failure to record adjusting entries can misstate financial reports by understating revenues, expenses and assets or overstating equities.

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Noshair Ali
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5K views3 pages

Adjusting Entries MCQs

This document contains 20 multiple choice questions about adjusting entries. Adjusting entries affect both income statement and balance sheet accounts, and are made at the end of an accounting period to allocate revenues and expenses to the proper periods. Examples of adjusting entries include debiting prepaid expenses and crediting expenses, and debiting unearned revenue and crediting revenue. Failure to record adjusting entries can misstate financial reports by understating revenues, expenses and assets or overstating equities.

Uploaded by

Noshair Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Adjusting Entries MCQs

1. Every adjusting entry affects?

(a) Income statement account only (c) Both A & B


(b) Balance sheet account only (d) None!
2. If a business pays for only 11 months’ rent during a financial year, what accounting term is given to
the outstanding one month's rent?

(a) Repayment (c) Underpayment


(b) Prepayment (d) Payable
3. The record of such transactions in the book of prime entry is called?

(a) Adjustments (c) Ledger


(b) Trial balance (d) Income Statement
4. Adjusting Entries?

(a) Assign revenue to the period in which they are earned


(b) Help to properly measure the period’s Net Profit / Loss
(c) Bring asset and liability account to correct balances
(d) All of about statements are true regarding Adjusting Entries

5. A balance of unearned rent at the end of period represents?

(a) An asset (c) A liability


(b) An expenses (d) Revenue
6. Which one of the following is an example of unearned income?

(a) Cash paid to supplier


(b) Advanced received from bank
(c) Advanced received from a customer for a purchase order place by him
(d) Cash this count received from customer

7. The portion of cost expires during a year is?

(a) Cost (c) Expenditure


(b) Expense (d) None
8. Which of the following is not an adjusting entry?

(a) Debit unearned revenue; credit revenue


(b) Debit insurance expense; credit pre-paid insurance
(c) Debit cash; credit unearned revenue
(d) Debit wages expense; credit wages payable
9. A liability account that reports amounts received in advance of providing goods and services?

(a) Unearned Revenue (b) Earned liabilities (c) A and B


10. Which of the following entries records the utility bill incurred but not paid from the water
company?

(a) Debit Utilities Expense; credit Accounts Payable


(b) Debit Accounts Payable; credit Utilities Payable
(c) Debit Accounts Payable; credit Cash
(d) Debit Utilities Payable; credit Accounts Receivable

11. An increase in value of a fixed asset is known as?

(a) Depreciation (c) Appreciation


(b) Accumulated Depreciation (d) Written Down Value

12. Short Term Loan can be best describing as?

(a) If the period is three years (c) If the period is less TEMPthan one year
(b) If the period is over one year (d) B and C
13. Which of the following is true for every adjusting entry?

(a) They affect only income statement accounts


(b) They affect balance sheet account and an income statement account
(c) They effect only balance sheet accounts
(d) They affect only accounts sith normal debit balance

14. Unearned revenues are?

(a) Prepayments (c) Temporary accounts


(b) Liabilities (d) Both a and b above
15. Which of the following is not an adjusting entry?

(a) Debit unearned revenue; credit revenue


(b) Debit rent expense; credit rent payable
(c) Debit rent expense; credit pre-paid rent
(d) Debit unearned revenue; credit pre-paid expenses

16. How does failure to record accrued revenue this tort the financial reports?

(a) It understates revenue, net income, and current assets


(b) It understates net income, stockholders’ equity, and current liabilities
(c) It overstates revenue, stockholders’ equity, and current liabilities
(d) It understates current assets and overstates stockholders’ equity
17. The purpose of adjusting entries is to?

(a) Adjust the owner’s capital account for the revenue, expense and drawings recorded during the
accounting period
(b) Adjust daily the balances in asset, liability, revenue and expense accounts for the TEMPeffects
of business transactions
(c) Apply the realization principle and the matching principle to transactions effecting two or more
periods
(d) Prepare revenue and expense accounts for recording the transactions of the next accounting
period

18. When the goods are provided, unearned revenue decreased and a revenue account is?

(a) Increased (c) Remain same


(b) Decreased (d) A and C
19. Which of the following should not be called “Sales”?

(a) Goods sold for cash (c) Goods sold on credit


(b) Office fixtures sold (d) All of before
20. The revenue receipt is shown in income statement as a?

(a) Expense (c) Other income


(b) Income (d) Other expense

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