One of the Major Advantages of Making Adjustments in Order

question 81

Multiple Choice

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

• A)ensure that revenues and expenses are recognized during the period they are earned and incurred.
• B)ensure that all estimates of future activities are eliminated from consideration.
• C)ensure that revenues and expenses are recognized conservatively during the period in which they are paid.
• D)provide an opportunity to manipulate the numbers to the best advantage of the reporting company.

---

Definitions:

Accounts Receivable

Accounts receivable represents money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Subsidiary Accounts

Subsidiary accounts are detailed records that support or explain the balances in one or more general ledger accounts.

Control Account

A general ledger account that summarizes the total amounts recorded in subsidiary ledgers for individual components, like accounts receivable or payable.

Special Journals

Accounting journals designed for recording a specific type of transaction in a detailed manner, such as sales or purchases.