Adjusting Entries

question 17

Multiple Choice

Adjusting entries:

• A)affect only balance sheet accounts.
• B)affect only income statement accounts.
• C)affect only cash flow accounts.
• D)affect both income statement and balance sheet accounts.

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Definitions:

Absorption Cost Approach

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a unit of product.

Manufacturing Costs

Expenses directly related to the production of goods, such as raw materials, labor, and factory overhead.

Direct Labor

The labor costs of workers who are directly involved in the production of goods or the provision of services.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, culminating in the net profit or loss.