Adjusting Entries Are Necessary to

question 9

Multiple Choice

Adjusting entries are necessary to
1. obtain a proper matching of revenue and expense.
2. achieve an accurate statement of assets and equities.
3. adjust assets and liabilities to their fair market value.

• A) 1
• B) 2
• C) 3
• D) 1 and 2

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Definitions:

Residual Income

The income that remains after all costs and expenses, including the cost of capital, have been subtracted from net income.

Average Invested Capital

The average amount of money invested in a company over a certain period, used to evaluate the company's financial performance.

Investment Turnover

An indicator of how effectively an organization is using its invested capital to produce income.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales generated, expressed as a percentage.