Financial Chapter 3

Which of the following statements is false?

a. Adjusting entries always affect at least one revenue or expense account and one asset or liability account. b. The cash account will always be affected by adjusting journal entries. c. Adjusting entries can be classified as either accruals or deferrals. d. Adjusting entries are necessary because timing differences exist between when a revenue or expense is recognized and cash is received or paid. b

Which transaction would require adjustment at December 31?

a. Salaries were paid to employees on December 15 for work that was performed in November. b. Merchandise was sold for cash on December 31. c. A one-year insurance policy (which took effect immediately) was purchased on December 1. d. Bonds were issued on October 31 c

Which of the following is true regarding the accounting cycle?

The temporary accounts are closed after the financial statements are prepared

Which of the following statements is true?

a. Accrual-basis accounting records both cash and noncash transactions when they occur. b. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle. c. Generally accepted accounting principles require companies to use cash-basis accounting. d. Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. A

Which of the following statements is incorrect regarding preparing financial statements?

a. The income statement and the balance sheet are related through the retained earnings account. b. The adjusted trial balance is the primary source of information needed to prepare the financial statements. c. The adjusted trial balance lists only the balance sheet accounts in a "debit" and "credit" format. d. The financial statements are prepared in the following order: (1) the income statement, (2) the retained earnings statement, and (3) the balance sheet c