BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The profit reported on the income statement is ₱90, 000. However, adjusting entries have not been made at the end of the period for insurance expense of ₱550 and accrued salaries of ₱750. The correct profit should have been
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₱90, 000
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₱88, 700
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₱91, 300
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₱90, 200
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Explanation:
Detailed explanation-1: -If the adjusting entry is not made, assets, owner’s equity, and net income will be overstated, and expenses will be understated.
Detailed explanation-2: -What will happen if a business does not make an adjusting entry at the end of the period to record an accrued expense? It will cause an understatement of expenses and an understatement of liabilities.
Detailed explanation-3: -If a company doesn’t make adjusting entry for accrued expenses: Liabilities will be overstated; expenses and net income will be understated.
Detailed explanation-4: -When profit or loss is exactly zero, one of the usual closing entries will be avoided. False 14. The Income Summary account appears in the income statement.
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