Adjusting Entries

question 26

Multiple Choice

Adjusting entries:

• A)Affect only income statement accounts.
• B)Affect only balance sheet accounts.
• C)Affect both income statement and balance sheet accounts.
• D)Affect cash accounts.
• E)Affect only equity accounts.

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Definitions:

LIFO

Last In, First Out is a method of valuing inventory where the items that were most recently produced or purchased are the first ones to be used in the calculation of cost of goods sold.

Periodic Inventory System

An inventory accounting system where updates are made on a periodic basis, such as monthly or yearly, rather than continuously.

Average-Cost Method

An inventory valuation method that calculates stock value based on the average cost of goods available for sale during the period.

Ending Inventory

Refers to the total value of goods available for sale at the end of an accounting period, not yet sold.