QUIZ 3 Flashcards
Adjusting entries are required
every time financial statements are prepared
The procedure that most nearly attains the objective of matching revenues and expenses to
specific accounting periods
Accrual basis of accounting
Following periodic inventory system, the account debited when providing adjusting entry to record
unsold goods at the end of the period is
Merchandise Inventory
Accrued interest income is presented as what in the SFP
Current asset in the Statement of Financial Position
Failure to adjust for the accrued expense at the end of the period would result in
Overstated profit and understated liabilities
Under the asset method of recording prepayments of expense items, the portion of the prepaid rent
that have expired will be credited to
Prepaid Rent Expense
An adjustment for unearned income includes
a debit to an unearned income account and a credit to an income account
The following are contra-accounts EXCEPTA. Allowance for Doubtful Accounts
B. Accumulated Depreciation
C. Depreciation
D. Purchase Returns and Allowances
Depreciation
The following data are considered in the computation of the depreciation of property and equipment
EXCEPT:
A. Appraised value
B. Original cost
C. Estimated useful life
D. Estimated scrap value
Appraised value
At the end of accounting period, FDN Trading debited Doubtful Accounts Expense and credited
Allowance for Doubtful Accounts. The purpose of this entry is to:
A. Decrease the Allowance for Doubtful Accounts
B. Decrease the Doubtful Accounts Expense
C. Determine the net carrying amount of Accounts Receivable
D. Determine the provision for estimated uncollectible accounts
Determine the provision for estimated uncollectible accounts
Adjusting entries are made to update certain accounts so that they reflect correct balances as of
the designated time.
TRUE
Before adjustments for the ending merchandise inventory, cost of sales is overstated, and assets
are understated.
TRUE
Accrued revenues are amounts that have been received but not yet entered in the accounting
records
FALSE
Accrued revenues are income earned but not yet collected
An expense – liability relationship exists with accrued expense adjusting entries.
TRUE
Adjusting entry for either accrued or prepaid expenses will increase the total expense
TRUE
Failure to adjust a prepayment recorded under the asset method causes total assets and total
expenses to be overstated
FALSE
Total expenses will be understated.
The balance of unearned revenue after adjustments will be zero if all advance payments were
collected during the period.
FALSE
The balance of unearned revenue after adjustments will be zero if all advance payments were
earned during the period
Depreciation is the gradual decrease in value, not the cost, of a non-current asset
TRUE
The primary accounting principle supporting the use of the allowance for doubtful accounts is the
cost principle
FALSE
The primary accounting principles supporting the use of the allowance for doubtful are matching
and conservatism
The adjusting entry for doubtful accounts will increase the total expenses and decrease the total
assets of the company.
TRUE
When a portion of the unearned income has already been earned, the adjusting entry will include a credit to unearned income account.
False
Under the allowance method, the net realizable value of accounts receivable is obtained by deducting the Doubtful Accounts Expense from the balance of accounts receivable.
False
An understatement of ending inventory will cause:
An understatement of assets and an overstatement of equity on the Statement of Financial Position.
FDN Trading rented a small portion of its store to a small business owner amounting to P5,000 but remains to be unpaid to FDN Trading as of the end of the accounting period. What entry must FDN Trading make
Debit Accrued Rent Revenue and credit Unearned Rent Revenue
Failure to account for the residual value of a depreciable asset will
overstate total asset.
Failure to account for the residual value of a depreciable asset will
Overstate expenses
