What are Adjusting Entries in accounting?

Adjusting Entries journal entries made to correct the accounting records of a company. They are used to ensure that the Financial Statements of a company accurately reflect the company's financial position. Adjusting Entries can be made for a variety of reasons, such as correcting errors, accruing expenses and revenue, and adjusting inventory levels.

What are some common types of Adjusting Entries?

Some common types of Adjusting Entries include the following: accruing expenses, accruing revenue, correcting errors, and adjusting inventory levels.

Why are Adjusting Entries important?

Adjusting Entries are important because they help to ensure that the Financial Statements of a company are accurate and reliable. By making adjustments to the accounting records, companies can ensure that their financial position is accurately reflected in the Financial Statements. This can help investors and other stakeholders to make informed decisions about investing in a company and can help to ensure that the Financial Statements are in compliance with accounting standards.

What are the adjustment entries in accounting?

An adjusting entry is simply an adjustment to your books to make your Financial Statements more accurate, usually on an Accrual Basis.

When is adjusting of entries done?

Adjusting Entries are made toward the end of each accounting period. This can be at month-end or year-end.

Adjusting Entries MCQ Quiz With Answers 1

This is the first multiple choice question (MCQ) test on adjusting entries. This MCQ test will help you to prepare for your exams, interviews, and other assessments.

Just click the "Start quiz" button below to begin the quiz. If you find it difficult to answer any of these questions, you can learn more about adjusting entries on our website.

1. The entries required at the end of the period to update the accounts before preparing financial statements are known as:

Closing entries
Adjusting entries
Journal entries
Opening entries

2. An expense paid in advance is called:

Accrued expense
Outstanding expense
Prepaid expense
Payable expense

3. Which of the following statements is most appropriate?

Adjusting entries affect balance sheet accounts only
Adjusting entries affect income statement accounts only
Adjusting entries affect both balance sheet accounts and income statement accounts
Adjusting entries may affect two or more balance sheet accounts or two or more income statement accounts, but they cannot affect both balance sheet and income statement accounts

4. Which of the following correctly represents the sequence of the accounting cycle?

Transaction analysis > Ledger > Journal > Trial balance > Adjusting entries
Transaction analysis > Journal > Ledger > Adjusting entries > Trial balance
Transaction analysis > Journal > Ledger > Trial balance > Adjusting entries
None of the above

5. A prepaid expense represents:

An asset
A liability
An expense
None of the above

6. Accrued expenses are:

Expenses
Assets
Income
Liabilities

7. The balance in an unearned rent account at the end of an accounting period represents:

An asset
A liability
An expense
A contingent liability

8. The purpose of adjusting entries is to:

To correct and update accounts
To balance the books for the year
To record unpaid expenses
To calculate profit

9. A portion of income received in advance is called:

Unearned income
Accrued income
Earned income
Expired income

10. On a balance sheet, outstanding expenses are shown as:

Assets
Income
Liabilities
Capital

11. The adjusting entry for outstanding rent is:

Outstanding rent - Dr. & Rent expense - Cr.
Outstanding rent - Dr. & Cash - Cr.
Rent expense - Dr. & A/C P.A - Cr.
Rent expense - Dr. & Outstanding rent - Cr.

12. Which one of the following is a correct adjusting entry to record depreciation on furniture?

Depreciation expense - Furniture - Dr. & Accumulated depreciation - Furniture - Cr.
Depreciation expense - Furniture - Dr. & Fixed assets - Cr.
Depreciation expense - Furniture - Dr. & Capital - Cr.
Accumulated depreciation - Dr. & Depreciation expense - Furniture - Cr.