#1
Which of the following is an example of a financial accounting adjustment?
Recording a cash sale
Depreciation of fixed assets
Hiring new employees
Purchasing inventory
#2
Which of the following is an example of a prepaid expense?
Payment for utilities bill at the end of the month
Payment for insurance coverage for the next six months
Payment for inventory purchases on credit
Payment for salaries of employees
#3
Which of the following is an example of an accrued revenue?
Payment received in advance for services not yet rendered
Payment received for goods sold on credit
Service provided to a customer for which payment has not yet been received
Payment made for utility bills
#4
Which of the following is an example of a contra revenue account?
Sales Revenue
Sales Discounts
Cost of Goods Sold
Interest Revenue
#5
Which of the following is an example of a contra asset account?
Accumulated Depreciation
Accounts Payable
Prepaid Expenses
Inventory
#6
What is the purpose of adjusting entries in financial accounting?
To correct errors in previous financial statements
To record transactions that occurred after the reporting period
To ensure expenses and revenues are recognized in the correct accounting period
To comply with tax regulations
#7
Which financial statement is directly affected by adjusting entries?
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Retained Earnings
#8
What is the purpose of the closing entries in the accounting cycle?
To adjust the balances of accounts to reflect their fair market value
To prepare financial statements for external users
To transfer temporary account balances to the permanent account
To correct errors made during the accounting period
#9
Which financial statement does not require closing entries?
Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Retained Earnings
#10
What is the purpose of the allowance method for bad debts?
To estimate the amount of uncollectible accounts receivable
To write off all bad debts as they occur
To record bad debts as they are specifically identified
To adjust the balance of accounts receivable to their fair market value
#11
An adjusting entry to record accrued expenses will:
Decrease expenses and decrease liabilities
Decrease expenses and increase assets
Increase expenses and increase liabilities
Increase expenses and decrease assets
#12
What is the purpose of a contra asset account in adjusting entries?
To decrease the balance of a related asset account
To increase the balance of a related liability account
To record non-cash transactions
To report extraordinary gains or losses
#13
In a closing entry, which account's balance is transferred to the Income Summary account?
Revenue accounts
Expense accounts
Asset accounts
Liability accounts
#14
What is the purpose of post-closing trial balance?
To verify that all temporary accounts have been closed properly
To identify and correct errors made during the closing process
To prepare financial statements for external users
To calculate the retained earnings of a company
#15
In the allowance method, what is the journal entry to record estimated bad debts?
Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts
Debit Allowance for Doubtful Accounts, Credit Bad Debt Expense
Debit Accounts Receivable, Credit Bad Debt Expense
Debit Bad Debt Expense, Credit Accounts Receivable