The Effect of an Adjustment on the Financial Statements Is

question 35

Multiple Choice

The effect of an adjustment on the financial statements is usually to:

• A)make the balance sheet balance.
• B)increase net income.
• C)increase the accuracy of both the balance sheet and income statement.
• D)match revenues and assets.

Understand the objectives and guidelines provided by the Conceptual Framework for Financial Reporting.

Identify what constitutes income and the exclusion of owner contributions from income.

Differentiate between settlements of liabilities and contributions by owners.

Describe how equity is affected by profit, loss, and owner contributions.

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Definitions:

Court

An institution established to administer justice through the interpretation of laws and the adjudication of legal disputes.

Writ of Mandamus

A court order mandating that a public agency or governmental body perform an act required by law when it has neglected or refused to do so.

Writ of Certiorari

A court order requesting the lower court to deliver its record in a case so that the higher court may review it.

Building Permit

Official authorization issued by a local government or regulatory authority to construct, alter, or demolish a building or structure.