At the End of the Fiscal Year, an Adjusting Entry

question 30

Multiple Choice

At the end of the fiscal year, an adjusting entry is made that increases salaries payable and increases salaries expense.This entry is an application of which accounting principle?

• A) full disclosure
• B) materiality
• C) matching
• D) realization
• E) historical cost

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Definitions:

Salaries

Regular payments made to employees for their services, typically expressed as an annual sum but paid in regular installments.

Statement of Cash Flows

A financial report that shows cash inflows and outflows from operating, investing, and financing activities over a specific period.

Indirect Method

Refers to a way of creating the statement of cash flows where net income is adjusted for non-cash transactions, expenses, and changes in working capital.

Merchandise

Goods bought and sold in the course of business, typically in a retail environment.