A Company Forgot to Record Four Adjustments During the Current

question 144

Multiple Choice

A company forgot to record four adjustments during the current year. Which one of the following omissions of adjustments will understate assets?

• A)Unearned revenue is not reduced for the portion that has been earned
• B)Interest on monies loaned out has not yet been recorded
• C)Prepaid insurance is not reduced for the portion of the policy that has expired during the period
• D)Income taxes owed but not yet paid are ignored

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Definitions:

Accounting System

A structured process of collecting, recording, summarizing, and interpreting financial information of a business.

Adjusting Entries

At the close of a financial period, journal entries are created to distribute earnings and costs to the period in which they genuinely took place.

Adjusted Trial Balance

is a listing of all company accounts that will appear on the financial statements after making end-of-period adjustments.

Reversing Entry

An accounting entry made at the beginning of an accounting period to reverse or cancel out a previous adjusting entry.