Reversing Entries

question 55

Multiple Choice

Reversing entries:

• A) are necessary when journal entries have been incorrectly recorded.
• B) are a required step in the accounting cycle.
• C) will often result in abnormal account balances in some accounts.
• D) are required only if the company uses accounting software to record journal entries.
• E) must be made before preparing the post-closing trial balance.

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Definitions:

Equal Payments

Consistent payment amounts made regularly over a period, typical in loans and annuities.

Simple Interest

Interest calculated on the principal sum only, not compounding on earned interest, typically over a period of time.

Savings Account

A bank account that earns interest over time, designed for the deposit of funds not intended for immediate use.

Discounted

The reduction applied to the face value or current price of an item or financial instrument, taking into account factors such as time, interest rate, and risk.