Master Adjusting Entries in Financial Accounting for MBA: Practice Quizzes

Question 1

Which of the following accounts is NOT affected by adjusting entries?

Accepted Answer

Cash

Answer

Accrued expenses

Answer

Deferred revenues

Answer

Prepaid assets

Question 2

Which type of adjusting entry records revenue earned but not yet received?

Accepted Answer

Accrued revenue

Answer

Deferred revenue

Answer

Prepaid expense

Answer

Depreciation expense

Question 3

Why are adjusting entries important in the context of GAAP?

Accepted Answer

To ensure the accuracy and reliability of financial statements.

Answer

To comply with tax regulations.

Answer

To simplify the accounting process.

Answer

To avoid penalties from regulatory bodies.

Question 4

Which of the following is an example of an adjusting entry for an accrued expense?

Accepted Answer

Insurance Expense: $200; Prepaid Insurance: $200

Answer

Rent Expense: $1,000; Prepaid Rent: $1,000

Answer

Supplies Expense: $300; Supplies: $300

Answer

Utilities Expense: $400; Accounts Payable: $400

Question 5

Which of the following is an example of an adjusting entry for a deferred revenue?

Accepted Answer

Unearned Revenue: $500; Service Revenue: $500

Answer

Supplies Expense: $300; Supplies: $300

Answer

Insurance Expense: $200; Prepaid Insurance: $200

Answer

Rent Expense: $1,000; Prepaid Rent: $1,000

Question 6

Which of the following accounts is NOT affected by adjusting entries?

Accepted Answer

Retained Earnings

Answer

Cash

Answer

Accounts Receivable

Answer

Prepaid Rent

Question 7

When are adjusting entries typically made?

Accepted Answer

At the end of the accounting period

Answer

Monthly

Answer

Quarterly

Answer

Annually

Question 8

How does an adjusting entry for depreciation impact the financial statements?

Accepted Answer

Increases expenses and reduces net income

Answer

Increases expenses and increases net income

Answer

Decreases expenses and increases net income

Answer

Decreases expenses and decreases net income

Question 9

Which of the following is NOT a type of revenue-related adjusting entry?

Accepted Answer

Depreciation

Answer

Accrued revenue

Answer

Deferred revenue

Answer

Unearned revenue

Question 10

What is the main purpose of an adjusting entry for bad debts?

Accepted Answer

To estimate and record the amount of uncollectible accounts

Answer

To write off specific uncollectible accounts

Answer

To reverse the allowance for doubtful accounts

Answer

To increase the balance of accounts receivable

Question 11

Which account is affected by an adjusting entry for interest expense?

Accepted Answer

Interest payable

Answer

Interest receivable

Answer

Notes payable

Answer

Bonds payable

Question 12

When is the appropriate time to make an adjusting entry for prepaid insurance?

Accepted Answer

At the end of the accounting period

Answer

At the beginning of the accounting period

Answer

When the insurance policy expires

Answer

When the insurance premium is paid

Question 13

What is a key benefit of using adjusting entries?

Accepted Answer

Improved accuracy of financial statements

Answer

Reduced time spent on record-keeping

Answer

Lower risk of financial statement errors

Answer

Increased efficiency in preparing financial statements

Question 14

Which type of adjusting entry is used to record expenses that have been incurred but not yet paid?

Accepted Answer

Accrued expenses

Answer

Prepaid expenses

Answer

Depreciation

Answer

Unearned revenue

Question 15

The adjusting entry to record depreciation expense would include a:

Accepted Answer

Debit to Depreciation Expense and Credit to Accumulated Depreciation

Answer

Debit to Accumulated Depreciation and Credit to Depreciation Expense

Answer

Debit to Depreciation Expense and Credit to Retained Earnings

Answer

Debit to Retained Earnings and Credit to Accumulated Depreciation

Question 16

Adjusting entries are typically made at the:

Accepted Answer

End of the accounting period

Answer

Beginning of the accounting period

Answer

Middle of the accounting period

Answer

Randomly throughout the accounting period

Question 17

True or False: Adjusting entries can affect both the balance sheet and the income statement.

Accepted Answer

True

Answer

False

Question 18

The purpose of an adjusting entry for accrued revenue is to:

Accepted Answer

Recognize revenue that has been earned but not yet recorded

Answer

Record revenue that has been received but not yet earned

Answer

Adjust the balance of revenue to its true value

Answer

Correct an error in the recording of revenue

Question 19

Which of the following accounts is NOT affected by adjusting entries?

Accepted Answer

Owner's Equity

Answer

Cash

Answer

Prepaid Expenses

Answer

Inventory

Question 20

What is the primary objective of making adjusting entries?

Accepted Answer

To update account balances to reflect current financial information

Answer

To correct inaccuracies and omissions in the initial recording of transactions

Answer

To adjust errors made in the preparation of financial statements

Answer

To eliminate unrealized gains and losses

Question 21

Which type of adjusting entry records income earned but not yet received?

Accepted Answer

Accrual

Answer

Deferral

Answer

Correcting

Answer

Reversing

Question 22

In an accrual adjusting entry, which account is typically debited?

Accepted Answer

Accrued Expenses

Answer

Cash

Answer

Accounts Payable

Answer

Unearned Revenue

Question 23

What type of account is an accrued expense classified as?

Accepted Answer

Liability

Answer

Asset

Answer

Equity

Answer

Revenue

Question 24

Which of the following is a common example of a prepaid expense?

Accepted Answer

Insurance premium

Answer

Office supplies

Answer

Accounts receivable

Answer

Cash

Question 25

How does an accrued expense adjustment impact the income statement?

Accepted Answer

Increases expenses and decreases revenue.

Answer

Increases revenue and decreases expenses.

Answer

Decreases expenses and increases revenue.

Answer

No impact

Question 26

Which of the following is an example of a prepaid expense?

Accepted Answer

Insurance premium paid in advance

Answer

Supplies used

Answer

Accrued salaries payable

Answer

Interest earned

Question 27

What is the primary aim of the depreciation adjustment?

Accepted Answer

To allocate the cost of an asset over its useful life.

Answer

To reflect the decline in asset value over time.

Answer

To increase the asset's carrying value.

Answer

To prepare for asset disposal.

Question 28

Which of the following is NOT a step in the adjusting process?

Accepted Answer

Preparing financial reports.

Answer

Identifying necessary adjustments.

Answer

Preparing adjusting entries.

Answer

Posting adjustments to the ledger.

Question 29

What is the effect of recording unearned revenue on the balance sheet?

Accepted Answer

Increases liabilities and decreases revenue.

Answer

Increases revenue and decreases liabilities.

Answer

Decreases assets and increases revenue.

Answer

No impact on the balance sheet.

Question 30

Which of the following is NOT an adjusting entry?

Accepted Answer

Closing the income statement

Answer

Accruing wages

Answer

Depreciating fixed assets

Answer

Recording unearned revenue.

Question 31

What is the primary objective of adjusting entries?

Accepted Answer

To guarantee the accuracy and completeness of financial statements at the accounting period's end

Answer

To rectify errors made initially when recording transactions

Answer

To assign expenses across multiple accounting periods

Answer

To streamline the accounting process

Question 32

When do businesses typically perform the adjusting process?

Accepted Answer

At the end of each accounting period

Answer

At the beginning of each accounting period

Answer

Monthly

Answer

Quarterly

Question 33

Which principle is of utmost importance when making adjusting entries?

Accepted Answer

Consistency

Answer

Materiality

Answer

Conservatism

Answer

Going concern

Question 34

Which type of adjusting entry is used to record expenses incurred but not yet paid?

Accepted Answer

Accrued expense

Answer

Prepaid expense

Answer

Deferred revenue

Answer

Unearned revenue

Question 35

How do accrued expense adjusting entries impact the financial statements?

Accepted Answer

Increase expense and liability

Answer

Increase expense and decrease asset

Answer

Increase revenue and increase liability

Answer

Decrease expense and decrease liability

Question 36

Which of the following is NOT a common type of prepaid expense?

Accepted Answer

Rent

Answer

Insurance

Answer

Utilities

Answer

Supplies

Question 37

What is the main purpose of recording an adjusting entry for deferred revenue?

Accepted Answer

Recognizing earned but unreceived revenue

Answer

Recording expenses incurred but not yet paid

Answer

Allocating expenses and revenues to appropriate periods

Answer

Correcting errors in transaction recording

Question 38

How does the recognition principle relate to adjusting entries?

Accepted Answer

Adjusting entries ensure revenues and expenses are recognized in appropriate periods

Answer

Adjusting entries are not required under the recognition principle

Answer

The recognition principle requires recording all transactions in the accounting records

Answer

Adjusting entries are only made for material transactions

Question 39

What is the initial step in the adjusting entries process?

Accepted Answer

Identifying unrecorded events

Answer

Preparing adjusting journal entries

Answer

Posting adjusting journal entries to the ledger

Answer

Preparing financial statements

Question 40

What is the significance of the trial balance after adjusting entries have been recorded?

Accepted Answer

It should balance (equal debits and credits)

Answer

It shows account balances at the accounting period's end

Answer

It is used to prepare financial statements

Answer

It is not used in the accounting process

Question 41

When recording an accrual, which type of account is debited?

Accepted Answer

Liability

Answer

Asset

Answer

Expense

Answer

Revenue

Question 42

What is the purpose of a reversing entry?

Accepted Answer

Reverse the effect of an adjusting entry at the beginning of the next accounting period

Answer

Correct an error in an adjusting entry

Answer

Allocate expenses to the periods in which they are incurred

Answer

Adjust the book value of assets

Question 43

Which of the following is the primary purpose of making adjusting entries?

Accepted Answer

To update financial statements to accurately reflect economic events and transactions that occurred during the accounting period but were not yet recorded.

Answer

To rectify errors made in recording transactions.

Answer

To allocate revenues and expenses to the appropriate accounting periods.

Answer

To maintain compliance with Generally Accepted Accounting Principles (GAAP).

Question 44

Which type of adjusting entry is used to record an expense incurred but not yet paid?

Accepted Answer

Accrued expense

Answer

Prepaid expense

Answer

Deferred revenue

Answer

Unearned revenue

Question 45

Which of the following is NOT a benefit of making adjusting entries?

Accepted Answer

Simplifies the accounting process.

Answer

Ensures the accuracy and completeness of financial statements.

Answer

Facilitates compliance with GAAP.

Answer

Improves budgeting and forecasting capabilities.

Question 46

What is the purpose of a reversing entry?

Accepted Answer

To reverse the adjusting entry made at the end of the accounting period.

Answer

To correct errors made in the recording process.

Answer

To transfer balances from temporary to permanent accounts.

Answer

To close out revenue and expense accounts.