Accounting 252 Final Exam Review

How do adjusting entries for accrued expenses affect liabilities and expenses?

Adjusting entries for accrued expenses can increase liabilities and increase expenses.

Which of the following statements describes the effect that adjusting entries may have on liabilities?

Adjusting entries increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.

Which of the following accounts will never be affected by an adjusting entry?

Cash

True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

False

If a company incorrectly records cash received for services to be provided in the future with a debit to Cash and a credit to Sales Revenue, how will this error affect net income for the current period?

Net income will be too high.

The adjusting entry for an accrued revenue always includes: (Select all that apply.)

a debit to an asset account a credit to a revenue account

The adjusted trial balance provides account balances reported in which financial statements?

balance sheet statement of stockholders' equity income statement

An adjusting entry for accrued expenses involves: (Select all that apply.)

debit to an expense credit to a liability

The process of allocating the cost of an asset to expense over the useful life of the asset is called

depreciation.

The statement of stockholders' equity includes these amounts: (Select all that apply.)

net income ending balance retained earnings dividends for the period

Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____.

prepaid expenses; assets

Which of the following statements regarding the statement of cash flows are correct?

The final financial statement that is typically prepared Reports cash disbursements Reports cash receipts