Adjusting Entries and Financial Statements
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Prepaid insurance - Correct answers✔✔Insurance coverage purchased in advance
December 31 adjusting entry - Correct answers✔✔Adjustment made to financial statements at
year-end
Insurance expense - Correct answers✔✔Cost of insurance coverage
Prepaid insurance will decrease - Correct answers✔✔Effect of adjusting entry on prepaid
insurance
Income from operations - Correct answers✔✔Operating income before certain expenses
Depreciation expense - Correct answers✔✔Allocation of asset's cost over its useful life
Current ratio - Correct answers✔✔Measure of company's ability to pay short-term obligations
Equipment - Correct answers✔✔Tangible assets used in business operations
Long-term Notes Payable - Correct answers✔✔Debt obligations due beyond one year
Intangible Assets - Correct answers✔✔Non-physical assets with long-term value
, Supplies - Correct answers✔✔Inventory of consumable items
Wage Expense - Correct answers✔✔Cost of employee wages
Unearned Revenue - Correct answers✔✔Payment received in advance for goods or services
Prepaid Insurance - Correct answers✔✔Insurance coverage purchased in advance
Recording revenue - Correct answers✔✔Recognition of income from sales
Recording expenses - Correct answers✔✔Recognition of costs incurred
Assets - Correct answers✔✔Resources owned by the company
Liability accounts - Correct answers✔✔Obligations owed by the company
Stockholders' equity accounts - Correct answers✔✔Owners' claims to company's assets
Debit balance - Correct answers✔✔Positive balance in an account
Credit balance - Correct answers✔✔Negative balance in an account
Adjusted entries - Correct answers✔✔Entries made at year-end to update accounts
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Prepaid insurance - Correct answers✔✔Insurance coverage purchased in advance
December 31 adjusting entry - Correct answers✔✔Adjustment made to financial statements at
year-end
Insurance expense - Correct answers✔✔Cost of insurance coverage
Prepaid insurance will decrease - Correct answers✔✔Effect of adjusting entry on prepaid
insurance
Income from operations - Correct answers✔✔Operating income before certain expenses
Depreciation expense - Correct answers✔✔Allocation of asset's cost over its useful life
Current ratio - Correct answers✔✔Measure of company's ability to pay short-term obligations
Equipment - Correct answers✔✔Tangible assets used in business operations
Long-term Notes Payable - Correct answers✔✔Debt obligations due beyond one year
Intangible Assets - Correct answers✔✔Non-physical assets with long-term value
, Supplies - Correct answers✔✔Inventory of consumable items
Wage Expense - Correct answers✔✔Cost of employee wages
Unearned Revenue - Correct answers✔✔Payment received in advance for goods or services
Prepaid Insurance - Correct answers✔✔Insurance coverage purchased in advance
Recording revenue - Correct answers✔✔Recognition of income from sales
Recording expenses - Correct answers✔✔Recognition of costs incurred
Assets - Correct answers✔✔Resources owned by the company
Liability accounts - Correct answers✔✔Obligations owed by the company
Stockholders' equity accounts - Correct answers✔✔Owners' claims to company's assets
Debit balance - Correct answers✔✔Positive balance in an account
Credit balance - Correct answers✔✔Negative balance in an account
Adjusted entries - Correct answers✔✔Entries made at year-end to update accounts
