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:

Stockholders' Equity

The equity capital that is contributed by shareholders plus the retained earnings of the company. It represents the residual value of assets after liabilities have been settled.

Creditors' Risk

The risk that debtors will default on their obligations, resulting in financial loss for creditors.

Verifiable

The characteristic of information that can be checked for accuracy and reliability.

Financial Reports

Formal records of the financial activities and position of a business, individual, or other entity.