Which of the Following Statements Is False Regarding Adjusting Enries

question 37

Multiple Choice

Which of the following statements is false regarding adjusting enries?

• A) Cash is neither debited nor credited as a result of adjusting entries.
• B) Each adjusting entry affects one statement of financial position account and one income statement account.
• C) Each adjusting entry affects one revenue account and one expense account.
• D) Adjusting entries involve accruals or deferrals.

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Definitions:

Revenue Recognition

The principle in accounting that outlines the exact situations in which revenue is to be acknowledged and accounted for.

Transitory Earnings

Earnings that are considered temporary or not expected to persist over time, often removed from projections or models that attempt to predict a company's future profitability.

Extraordinary Loss

Unusual and infrequent charges that are reported separately on a company's income statement, outside of its regular business operations.

Discontinued Operations

Refers to segments or lines of business that a company has decided to sell, dispose of, or otherwise cease operations, and are reported separately from continuing operations in financial statements.