An Adjusting Entry Could Not Consist Of

question 207

Multiple Choice

An adjusting entry could not consist of:

• A) A debit to a liability and a credit to revenue.
• B) A debit to an expense and a credit to a liability.
• C) A debit to an expense and a credit to an asset.
• D) A debit to an expense and a credit to revenue.

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Definitions:

Deferred Tax Asset Valuation Allowance

A contra-asset account used to decrease the value of deferred tax assets if it is more likely than not they will not be realized.

Income Manipulation

The practice of adjusting financial statements with the intention to mislead stakeholders about the company's financial performance or health.

Deferred Tax Assets

These are financial items on a company’s balance sheet representing taxes paid or carried forward but not yet recognized in the income statement.