Question

1. Which of the following are examples of adjusting entries?

i) An entry to record interest owing on a bank loan at the end of the period. The interest is not yet paid, and is previously unrecorded.
ii) A depreciation entry to reflect the use of long-lived equipment during the period.
iii) An entry to correct an error that was discovered in the trial balance, when a $100 debit was incorrectly posted to inventory rather than accounts receivable.

a. i & ii

b. i & iii

c. ii & iii

d. i, ii, & iii

2. A company sold merchandise for cash. What is the effect of this sale?

a. increase in Revenue, increase in COGS, decrease in Inventory

b. increase in Revenue, decrease in COGS, increase in Inventory

c. increase in Revenue, increase in COGS, increase in Inventory

d. increase in Revenue, decrease in COGS, decrease in Inventory

Answer 1

1.Answer: A (i) and (ii)

Adjusting entries are those entries which are accounted for at the end of the accounting period so as that the matching principle is followed .

Examples for adjusting entries are :

Recording for depreciation expense , accrued expense , accrued income , outstanding expense etc.

2.Answer : A increase in revenue, increase in COGS , decrease in inventory .

When sales is made our inventory is sold out so inventory decreases , our profits increases and also cost for which the goods are sold also increases.

Journal entry to record sales will be :

Cash A/c

Sales A/c

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