Journal Entries and Adjusted Journal Entries

Question 1

What is a Special Purpose Framework?

Answer 1

A Special Purpose Framework is a set of accounting principles that are designed for specific types of entities or transactions, rather than following general accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS).

Question 2

True or False: Special Purpose Frameworks are only applicable to non-profit organizations.

Answer 2

False

Question 3

Fill in the blank: Journal entries are used to record __________ in an accounting system.

Answer 3

financial transactions

Question 4

What are the two main components of a journal entry?

Answer 4

Debits and Credits

Question 5

Multiple Choice: Which of the following is NOT a type of journal entry? A) Adjusting B) Closing C) Reversing D) Finalizing

Answer 5

D) Finalizing

Question 6

What is an Adjusted Journal Entry?

Answer 6

An Adjusted Journal Entry is a journal entry made at the end of an accounting period to update account balances before financial statements are prepared.

Question 7

True or False: Adjusting entries are only made for income and expense accounts.

Answer 7

False

Question 8

What is the purpose of adjusting journal entries?

Answer 8

To ensure that the financial statements reflect the true financial position and performance of an entity.

Question 9

Fill in the blank: Adjusted journal entries often affect __________ accounts.

Answer 9

asset, liability, revenue, and expense

Question 10

Multiple Choice: Which type of journal entry is used to correct errors? A) Adjusting B) Correcting C) Closing D) Reversing

Answer 10

B) Correcting

Question 11

What is the primary reason for making closing journal entries?

Answer 11

To transfer the balances of temporary accounts to permanent accounts at the end of the accounting period.

Question 12

True or False: A Special Purpose Framework can be used to prepare financial statements for tax purposes.

Answer 12

True

Question 13

Fill in the blank: The __________ account is often debited in an adjusting entry for accrued expenses.

Answer 13

Expense

Question 14

What type of account is typically credited in an adjusting entry for unearned revenue?

Answer 14

Revenue

Question 15

Multiple Choice: Which of the following is NOT a reason for making adjusting journal entries? A) To record accrued revenue B) To adjust for prepaid expenses C) To close the books D) To record asset purchases

Answer 15

D) To record asset purchases

Question 16

What is the impact of an adjusting entry on the balance sheet?

Answer 16

It updates the asset and liability balances to reflect the correct amounts at the reporting date.

Question 17

True or False: All entities must use a Special Purpose Framework.

Answer 17

False

Question 18

Fill in the blank: A __________ journal entry is made to reverse the effect of an adjusting entry made in the previous period.

Answer 18

Reversing

Question 19

What are the four types of adjusting entries?

Answer 19

Accruals, Deferrals, Estimates, and Inventory adjustments.

Question 20

Multiple Choice: Which of the following is an example of a deferral? A) Accrued salaries B) Prepaid insurance C) Interest receivable D) Accounts payable

Answer 20

B) Prepaid insurance

Question 21

What is the difference between an accrual and a deferral?

Answer 21

Accruals record revenues or expenses when they are incurred, while deferrals record revenues or expenses when cash is received or paid.

Question 22

True or False: Adjusting entries are optional in the accounting process.

Answer 22

False

Question 23

What is the journal entry for recording accrued wages?

Answer 23

Debit Wages Expense and Credit Wages Payable.

Question 24

Fill in the blank: The __________ account is debited when recording unearned revenue that has now been earned.

Answer 24

Unearned Revenue

Question 25

Multiple Choice: An adjusted trial balance is prepared after which step? A) Journalizing transactions B) Posting to the ledger C) Making adjusting entries D) Closing entries

Answer 25

C) Making adjusting entries

Question 26

What is the purpose of a trial balance?

Answer 26

To ensure that the total debits equal the total credits in the accounting records.

Question 27

True or False: A Special Purpose Framework can include tax basis accounting.

Answer 27

True

Question 28

What is the effect of an adjusting entry for depreciation?

Answer 28

It reduces the asset's book value and increases depreciation expense.

Question 29

Fill in the blank: The __________ principle requires that expenses be matched with revenues in the period in which they are incurred.

Answer 29

Matching

Question 30

What is the journal entry to record an adjusting entry for supplies used?

Answer 30

Debit Supplies Expense and Credit Supplies.

Question 31

Multiple Choice: Which of the following is an example of an estimate adjustment? A) Accrued interest B) Depreciation C) Prepaid rent D) Unearned revenue

Answer 31

B) Depreciation

Question 32

True or False: Adjusted journal entries are only necessary for public companies.

Answer 32

False

Question 33

What is the significance of the closing process in accounting?

Answer 33

It resets the balances of temporary accounts to zero for the next accounting period.