Adjusting Entries Are Needed

question 98

Multiple Choice

Adjusting entries are needed:

• A)Whenever revenue is not received in cash.
• B)Whenever expenses are not paid in cash.
• C)Only to correct errors in the initial recording of business transactions.
• D)Whenever transactions affect the revenue or expenses of more than one accounting period.

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Definitions:

Impairment Loss

A charge against earnings representing the amount by which the carrying amount of an asset exceeds its recoverable amount.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its net tangible and identifiable intangible assets.

Intangible Assets

Non-physical assets that represent a value to a company, such as patents, trademarks, copyrights, and goodwill.

Recoverable Amount

The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use.