Adjusting Entries Are Necessary to

question 26

Multiple Choice

Adjusting entries are necessary to

• A)obtain a proper matching of revenue and expense.
• B)achieve an accurate statement of assets and equities.
• C)adjust assets and liabilities to their fair market value.
• D)both a and b

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Definitions:

Income Tax Expense

The cost of income taxes, representing the taxpayer's obligation to federal, state, and sometimes local governments, based on earnings before taxes.

Interest Expense

The cost incurred by an entity for borrowed funds, typically reported on the income statement.

Profit Margin

A financial metric indicating the percentage of revenue that remains as profit after all expenses are deducted.

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income.