QUIZ 2

1. Which financial statement is directly impacted by adjusting entries for prepaid expenses and
accrued revenues?
a) Statement of Financial Position
b) Statements of Comprehensive Income
c) Both the Statement of Financial Position and Statements of Comprehensive Income
d) Statement of Cash Flows only
2. An adjusting entry to recognize accrued revenue will:
a) Decrease assets and decrease revenues
b) Increase assets and increase revenues
c) Increase assets and increase liabilities
d) Increase assets and increase expenses
3. The adjusting entry to recognize an accrued expense will:
a) Increase expenses and decrease liabilities
b) Increase expenses and increase liabilities
c) Decrease expenses and increase liabilities
d) Decrease expenses and decrease liabilities
4. A company failed to record the adjustment for accrued expenses at the end of the accounting
period. What effect does this error have on the financial statements?
a) Overstates liabilities and expenses, understates net income
b) Understates liabilities and expenses, overstates net income
c) Understates assets and revenues, overstates equity
d) Overstates assets and revenues, understates equity
5. Which of the following is an example of a contra-account?
a) Prepaid expense
b) Accrued revenue
c) Accumulated depreciation
d) Unearned revenue
6. The company's equipment was purchased for RM50,000 and has an estimated useful life of 10
years with no salvage value. Assuming straight-line depreciation, what is the adjusting entry
required at the end of the year?
a) Debit Depreciation Expense RM5,000; Credit Accumulated Depreciation RM5,000
b) Debit Depreciation Expense RM50,000; Credit Accumulated Depreciation RM50,000
c) No adjusting entry is needed for depreciation
d) Debit Equipment RM5,000; Credit Accumulated Depreciation RM5,000
7. If a company fails to make an adjusting entry for accrued revenues at the end of the
accounting period, what effect will this have on the financial statements?
a) Overstate assets and revenues, understate equity
b) Overstate liabilities and expenses, understate net income
c) Understate liabilities and expenses, overstate net income
d) Understate assets and revenues, overstate equity

8. A company pays RM12,000 in advance for rent for the next 12 months. Calculate the
adjusting entry required at the end of the first month
a) Debit Rent Expense RM1,000; Credit Prepaid Rent RM1,000
b) Debit Prepaid Rent RM1,000; Credit Rent Expense RM1,000
c) Debit Rent Expense RM12,000; Credit Prepaid Rent RM12,000
d) Debit Prepaid Rent RM12,000; Credit Rent Expense RM12,000
9. A company purchases office supplies for RM3,000 during the accounting period. At the end of
the period, RM800 worth of supplies is left. Calculate the adjusting entry required for the used
office supplies.
a) Debit Supplies Expense RM2,200; Credit Office Supplies RM2,200
b) Debit Office Supplies RM2,200; Credit Supplies Expense RM2,200
c) Debit Supplies Expense RM800; Credit Office Supplies RM800
d) Debit Office Supplies RM800; Credit Supplies Expense RM800
10. Which accounts are typically closed at the end of an accounting period?
a) Asset accounts only
b) Liability accounts only
c) Revenue and expense accounts
d) Equity accounts only

11. What is the closing entry for an expense account with a debit balance?
a) Debit the expense account, credit Income Summary
b) Credit the expense account, debit Income Summary
c) Debit the expense account, credit Retained Earnings
d) Credit the expense account, debit Retained Earnings

12. In a trial balance, where are asset accounts usually listed?

a) On the left side (debit side)
b) On the right side (credit side)
c) It varies and can be on either side
d) At the top of the trial balance

13. If a RM5,000 expense was inadvertently recorded as a credit instead of a debit, how does this
error affect the trial balance?
a) Increases the trial balance difference by RM5,000
b) Decreases the trial balance difference by RM5,000
c) Does not affect the trial balance difference
d) Changes the trial balance to zero

14. A trial balance has a RM9,000 difference. After reviewing, it is found that a RM9,000
purchase was incorrectly recorded as RM900. What is the correct adjustment to reconcile the
trial balance?
a) Debit RM8,100 to the respective expense account
b) Credit RM8,100 to the respective expense account
c) Debit RM8,100 to the respective asset account
d) Credit RM8,100 to the respective asset account