When Determining the Adjusting Entries That May Be Needed

question 78

Multiple Choice

When determining the adjusting entries that may be needed:

• A) prepaid rent requires an accrual adjustment.
• B) a deferral is an adjustment for payment of an item in advance.
• C) a deferral is an adjustment for the receipt of cash after the service has been performed.
• D) unpaid salaries requires a deferral adjustment.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities; represents the owners' share.

Current Assets

Current assets are all assets that a company expects to convert to cash or use within one year, such as inventory, accounts receivable, and cash.

Stockholders' Equity

Ownership equity represented by the leftover interest in a corporation's assets once its liabilities have been subtracted.

Account Receivable

Represents money owed to a business by its customers for goods or services delivered but not yet paid for.