If the Probability Plot of Residuals Resembles a Straight Line

question 97

True/False

If the probability plot of residuals resembles a straight line, the residuals show a fairly good fit to the normal distribution.

Know the effects of adjusting entries on pretax income and net income.

Grasp the concept of accruals and their impact on financial statements.

Differentiate between transactions that create and do not create deferrals.

Comprehend how the income statement and retained earning balances are connected.

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Definitions:

Reversing Entries

are journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries from the end of the previous period.

Reversing Entries

Journal entries that are made at the beginning of an accounting period to reverse or cancel out adjusting journal entries made at the end of the previous accounting period.

Assets

Resources owned by a company that have economic value and can provide future benefits.

Liabilities

Liabilities are financial obligations or debts owed by a business to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.