Chapter 4 Introduction - Study the Accounting Methods

Which report is constructed immediately prior to preparing the financial statements with the purpose of demonstrating that the accounts balance?

Adjusted trial balance.

_____ ensure that the revenues recognized and expenses incurred during the period are reflected in the income statement.

Adjusting entries

How does the timing of adjusting entries differ from the accounting for daily transactions?

Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

Which of the following statements is correct?

Financial statements are prepared after adjustments to ensure that all accounts have been brought to their correct balance.

Which of the following account balances will typically be increased as a result of adjusting entries?

Interest Payable; Supplies Expense.

Which of the following accounts found on an unadjusted balance typically require adjusting entries?

Supplies; Interest Payable; Prepaid Rent.

Why are the adjustments important to the preparation of the financial statements?

Unadjusted financial statements could present a misleading and incomplete picture of the company's financial results; Adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes.

What is a good starting point for determining which accounts require adjustment?

Unadjusted trial balance.

Adjusting entries are required to _____.

adjust the unadjusted balances to the desired balances

Without _____ entries, financial statements would present an incomplete and misleading picture of the company's financial position.

adjusting, adjustment, or adjusted

Adjusting entries are important because _____.

adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes; without them, the financial statements would be misleading.

Adjusting entries are made at the _____ of the accounting period, while daily transactions are made throughout the accounting period.

end, closing, or close

To determine the adjusting entries required, a(n) _____ is prepared.

unadjusted trial balance