Which of the Following Statements Is Incorrect

question 24

Multiple Choice

Which of the following statements is incorrect?

• A) Adjusting entries affect only balance sheet accounts.
• B) Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities.
• C) Adjusting entries can be used to record both accrued expenses and accrued revenues.
• D) Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time.
• E) Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded.

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Definitions:

Statement of Income

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or net loss.

Equity

The value of ownership interest in the firm, calculated as total assets minus total liabilities.

Account Payable

Liabilities of a company that are owed to creditors or suppliers for purchases made on credit.

Suppliers

They are businesses or individuals that provide the goods or services that companies need to operate and produce their own goods.