Adjusting Journal Entries Quiz

Which of the following best describes an adjusting journal entry?

• A journal entry made to record daily transactions

• A journal entry made to correct errors in financial statements

• A journal entry made at the end of an accounting period to update accounts

• A journal entry made only when cash is received

Why are adjusting journal entries necessary?

• To ensure expenses and revenues are recorded in the correct period

• To record transactions that involve cash payments only

• To increase a company's net income at year-end

• To avoid recording transactions twice

Which accounting principle requires the use of adjusting journal entries?

• Business Entity Principle

• Accrual Principle

• Cost Principle

• Going Concern Principle

Which of the following is NOT a type of adjusting journal entry?

• Prepaid Expense

• Unearned Revenue

• Accrued Expense

• Cash Sales

What type of adjusting entry is needed when a business records revenue before receiving cash?

• Prepaid Expense

• Accrued Revenue

• Depreciation

• Unearned Revenue

A company pays rent in advance for six months. At the end of the first month, what adjusting entry should be recorded?

• Debit Prepaid Rent, Credit Rent Expense

• Debit Rent Expense, Credit Prepaid Rent

• Debit Cash, Credit Rent Payable

• Debit Rent Payable, Credit Cash

What happens if adjusting entries are NOT recorded?

• The financial statements will still be accurate

• Expenses may be understated or overstated

• Net income will always be higher

• The trial balance will not balance

A company performed services worth ₱25,000 in December but will receive payment in January. What adjusting entry should be recorded in December?

• Debit Accounts Receivable ₱25,000, Credit Service Revenue ₱25,000

• Debit Service Revenue ₱25,000, Credit Accounts Receivable ₱25,000

• Debit Unearned Revenue ₱25,000, Credit Cash ₱25,000

• No adjusting entry is needed

A machine worth ₱500,000 depreciates by ₱50,000 per year. What adjusting entry should be recorded?

• Debit Depreciation Expense ₱50,000, Credit Accumulated Depreciation ₱50,000

• Debit Accumulated Depreciation ₱50,000, Credit Depreciation Expense ₱50,000

• Debit Equipment ₱50,000, Credit Depreciation Expense ₱50,000

• Debit Cash ₱50,000, Credit Accumulated Depreciation ₱50,000

A company received ₱10,000 from a customer in advance for services to be performed next month. What is the correct adjusting entry?

• Debit Unearned Revenue ₱10,000, Credit Service Revenue ₱10,000

• Debit Cash ₱10,000, Credit Unearned Revenue ₱10,000

• Debit Service Revenue ₱10,000, Credit Unearned Revenue ₱10,000

• No entry is needed until the service is performed