Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Summary of Adjusting Entries

Financial Accounting

3. Accrual Accounting Concepts

Summary of Adjusting Entries

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Multiple Choice

Which of the following statements about adjusting entries is FALSE?

Adjusting entries always involve at least one income statement account and one balance sheet account.

Adjusting entries are optional and can be omitted if the trial balance appears correct.

Adjusting entries ensure that revenues are recorded in the period in which they are earned.

Adjusting entries are made at the end of the accounting period to update account balances.

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Verified step by step guidance

Understand the purpose of adjusting entries: Adjusting entries are made at the end of the accounting period to ensure that the financial statements reflect the correct revenues and expenses for the period. They are necessary for accrual accounting, which records revenues when earned and expenses when incurred, regardless of cash flow.

Review the characteristics of adjusting entries: Adjusting entries always involve at least one income statement account (e.g., revenue or expense) and one balance sheet account (e.g., asset or liability). This ensures that the financial statements are accurate and comply with the matching principle.

Evaluate the statement 'Adjusting entries are optional and can be omitted if the trial balance appears correct': This statement is FALSE because adjusting entries are mandatory for accrual accounting to ensure the proper recognition of revenues and expenses. The trial balance may appear correct, but it does not account for accrued or deferred items without adjustments.

Consider the statement 'Adjusting entries ensure that revenues are recorded in the period in which they are earned': This statement is TRUE because adjusting entries align revenue recognition with the period in which the revenue-generating activity occurred, following the revenue recognition principle.

Analyze the statement 'Adjusting entries are made at the end of the accounting period to update account balances': This statement is TRUE because adjusting entries are typically prepared at the end of the accounting period to ensure that all accounts reflect accurate balances before financial statements are prepared.