If an Adjusting Entry Were Not Made at the End

question 40

Multiple Choice

If an adjusting entry were not made at the end of an accounting period to remove the earned revenue from the Unearned Revenue account,

• A) assets would be understated.
• B) stockholders' equity would be overstated.
• C) liabilities would be understated.
• D) liabilities would be overstated.

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Definitions:

Variable Expenses

Costs or expenses that change in proportion to business activity levels or volume, such as sales commissions or raw material costs.

Traceable Fixed Expenses

Fixed costs directly associated with specific business segments, which would be eliminated if the segment was discontinued.

Net Operating Income

The amount of income generated from regular business operations after subtracting operating expenses but before taxes and interest.

Single Product

Refers to a business strategy or condition where a company focuses on producing and selling one specific product.