Adjusting Entries Affect

question 155

Multiple Choice

Adjusting entries affect

• A) the balance sheet.
• B) the income statement.
• C) Neither of these answers is correct.
• D) Both A and B are correct.

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Definitions:

Cash Account

An account that records cash transactions including receipts, disbursements, and balances held in cash form by an entity.

Owner's Capital

The total equity of an owner in a company, representing the net assets belonging to the owner.

Prepaid Insurance

Payments made for insurance policies in advance; these are recorded as an asset until the coverage period elapses, at which point they become an expense.

Trial Balance

A worksheet used in accounting that consolidates all ledger balances into columns for debits and credits, with both columns having equal totals.