Question

1) When a service has been performed but no cash has been received, which of the following statements is true?

Select one:

a. No journal entry is made.

b. The entry includes a debit to Accounts payable.

c. The entry includes a credit to Unearned revenue.

d. The entry includes a debit to Accounts receivable.

2) Adjusting entries are:

Select one:

a. not necessary if the accounting system is operating properly.

b. usually required before financial statements are prepared.

c. made whenever management desires to change an account balance.

d. made to Statement of Financial Position accounts only.

3) Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause:

Select one:

a. an overstatement of assets and an overstatement of liabilities.

b. an understatement of expenses and an understatement of liabilities.

c. no any understatement or overstatement.

d. profit to be understated.

4) Which of the following is not a liability?

Select one:

a. Salaries and wages payables

b. GST collected

c. Revenue received in advance

d. GST paid

5) A credit entry to a liability account:

Select one:

a. indicates a decrease in the amount owed to creditors.

b. indicates an increase in the amount owed to creditors.

c. is an error.

d. MUST be accompanied by a debit to an asset account.

Answer 1

Part 1) OPTION D------ entry includes debit to accounts receivable

Since it will be recorded as services performed on credit.

Journal would be --- Accounts receivable debit, Services credit

Part 2)OPTION B------usually required before financial statements are prepared

Adjusting entries are usually required before financial statements are prepared. They are done to adhere the accrual concept of income, expense, asset, liabilities accounts.

Part 3)OPTION B----- Understatement of expenses and understatement of liabilities

Since missing entry for accrued expenses will be

Expense Debit, Accrued Expense Credit......... thereby reducing expenses and reducing liability.

Part 4) OPTION D------ GST paid

GST paid is not a liability. Rest other three items constitutes liability, since it creates an obligations which needs to be discharged.

Part 5)OPTION B----- indicates an increase in amount owed to creditors

Since credit entry to liability account increases the liability amount thereby increasing in the amount owed to creditors