Chapter 3

Although a trial balance may prove that debits and credits are equal, errors may still exist for which of the following reasons? A A transaction could have been completely omitted. B A transaction amount was correctly recorded for the debit but the numbers were transposed in the recorded credit amount. C Only the debit part of a transaction was recorded and the credit was omitted. D The debit for the transaction was correctly posted, but the credit was posted twice.

A. A transaction could have been completely omitted.

When are adjustments generally prepared? A After the balance sheet date, but dated as of the balance sheet date. B Before the balance sheet date, and dated before the balance sheet date. C Before the balance sheet date, and dated after the balance sheet date. D After the balance sheet date, and dated after the balance sheet date.

A. After the balance sheet date, but dated as of the balance sheet date.

Assets and expenses will not be affected by the recording of which of the following adjusting entries? A Customer deposits for future services. B Depreciation of fixed assets. C Expiration of prepaid insurance. D Use of supplies.

A. Customer deposits for future services.

Which of the following is not one of the significant purposes that the journal serves in the recording process? A It keeps complete information about changes in a specific account balance in one place. B It provides a chronological record of transactions. C It discloses the complete effect of a transaction in one place. You got it wrong : D It helps prevent or locate errors because debits and credits can be readily compared.

A. It keeps complete information about changes in a specific account balance in one place.

Which of the following would not be a correct form for an adjusting entry? A a debit to an asset and a credit to a liability. B a debit to a revenue and a credit to a liability. C a debit to an expense and a credit to a liability. D a debit to a liability and a credit to a revenue.

A. a debit to an asset and a credit to a liability.

Which of the following best describes an accrued revenue? A An amount collected for services performed. B An amount not collected for services performed. C An amount not collected and services not yet performed. D An amount collected prior to services being performed.

B. An amount not collected for services performed.

Which of the following would be the best description of an accrued expense? A An amount paid and recorded for expenses incurred. B An amount not paid or recorded for expenses incurred. C An amount paid and not recorded for expenses incurred. D An amount paid before expenses are incurred.

B. An amount not paid or recorded for expenses incurred.

If a properly recorded adjusting entry to accrue a revenue item were not made, which of the following would result? A An overstatement of revenues and an overstatement of assets. This is correct answer : B An understatement of revenues and an understatement of assets. C An understatement of revenues and an understatement of liabilities. D An overstatement of revenues and an overstatement of liabilities.

B. An understatement of revenues and an understatement of assets.

Which of the following is not a principal purpose of an unadjusted trial balance? A It proves that debits and credits of equal amounts are in the ledger. B It proves that debits and credits were properly entered in the ledger accounts. C It supplies a listing of open accounts and their balances. You got it wrong : D It is the basis for any adjustments to the account balances.

B. It proves that debits and credits were properly entered in the ledger accounts.

A type of error that a trial balance would help detect is A a transaction that is not journalized. This is correct answer : B a transposition error when transferring the debit side of journal entry to the ledger. C offsetting errors made in recording the transaction. D a journal entry that is posted twice.

B. a transposition error when transferring the debit side of journal entry to the ledger.

An example of an accrued expense would be A depreciation expense. B property taxes incurred during the year, to be paid in the first quarter of the subsequent year. C office supplies purchased at the beginning of the year and debited to an expense account. D rent recognized during the period, to be received at the end of the year.

B. property taxes incurred during the year, to be paid in the first quarter of the subsequent year.

When estimating depreciation on an asset for an accounting period, it is imperative to consider: A the decline in the asset's fair value only. B the original cost of the asset only. C both the original cost of the asset and its useful life. D the asset's useful life only.

C. both the original cost of the asset and its useful life.

A deferral is A cash paid in the same time period that an expense is incurred. B cash received after revenue is recognized. C cash paid after expense is incurred. D cash received before revenue is recognized.

D. cash received before revenue is recognized.

the general _________ contains transactions posted from entries in the general A ledger; journal. B ledger; account. C account; journal. D journal; ledger.

ledger; journal.