CHAPTER 21 ACCOUNTING TEST

an adjusting entry normally is reversed if the adjusting entry creates a balance in

an asset or liability account

when reversing entries are used and a note receivable is collected that was accepted in a previous fiscal period,

interest income is credited for the total amount of interest earned during the full term of the note

The reversing entry for interest income reduces the balance of Interest Receivable.

True

Accrued expenses are recorded by an adjusting entry at the beginning of the fiscal period

False

Making an adjusting entry to record revenue that has been earned but not yet received is an application of the accounting concept Historic Cost.

False

The adjusting entry for accrued interest expense increases the balance in the liability account Accounts Payable.

False

The adjusting entry for accrued interest income results in a debit to Interest Income.

False

The journal entry to close Interest Income results in a debit entry to Income Summary.

False

To record revenue that has been earned but not received, an adjusting entry is made at the beginning of the new fiscal period.

False

Accounting procedures require that revenue and expenses be recorded in the accounting period in which revenue is earned and expenses are incurred.

True

Accrued expense is a payable that is classified as a liability.

True

Accrued interest income is credited to the Interest Income account.

True

Accrued revenue is a receivable that is classified as an asset.

True

An Interest Payable credit balance is accrued interest expense incurred in the current year but to be payed in the next year.

True

At the end of a fiscal period, the Interest Expense balance after adjustments shows the amount of interest expense that has been incurred in the fiscal period.

True

Information needed to record closing entries for interest income is obtained from the Income Statement columns of a work sheet.

True

Interest incurred but not yet paid is accrued interest expense.

True

The adjustment for accrued interest income is planned on a work sheet.

True

The interest receivable account balance appears on a company's balance sheet as a current asset.

True

The reversing entry for accrued interest income results in a debit balance in the interest income account.

True

The closing entry for interest expense is

debit income summary ; credit interest expense.

the adjusting entries for accrued interest expense is

debit interest expense; credit interest payable

the entry to journalize the closing entry for interest income is

debit interest income; credit income summary

the entry to journalize the reversing entry for accrued interest income is

debit interest income; credit interest receivable

the reversing entry for accrued interest expense is

debit interest payable; credit interest expense

The entry to journalize the adjusting entry for accrued interest income is

debit interest receivable; credit interest income