If Adjusting Entries Are Not Prepared, Which Financial Statements Are

question 146

Multiple Choice

If adjusting entries are not prepared, which financial statements are misstated?

• A)income statement only
• B)balance sheet only
• C)statement of retained earnings only
• D)income statement, balance sheet and statement of retained earnings

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Definitions:

Average Operating Assets

The average value of the assets involved or used in the operating activities of a company over a given period, typically calculated as the average of the opening and closing balances of these assets.

Residual Income

Earnings that exceed the minimum required return on investment; it's what remains after all costs and expenses have been deducted.

Return on Investment

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments, calculated as net profit divided by the cost of the investment.

Gross Margin

The difference between revenue and cost of goods sold, divided by revenue, expressed as a percentage.