A closing entry includes a:

A

debit to Sales Revenue

B

credit to Cash.

C

credit to Accounts Receivable.

D

debit to Interest Expense.

During April, the Grass is Greener Company buys and pays for a six-month

supply of fertilizer in order to receive a bulk discount. The company uses accrual

basis accounting. The cost of fertilizer recorded:

A

as an asset, which will later be reduced as the fertilizer is used.

B

as a liability, which will later be reduced as the fertilizer used.

C

immediately as an expense.

D

partially as an expense and partially as a liability.

Permanent accounts are found on:

A

the balance sheet.

B

the income statement.

C

both the balance sheet and the income statement.

D

none of the financial statements.

Which of the following steps is performed first at the end of each accounting

period?

A

Prepare adjusting entries.

B

Prepare an adjusted trial balance.

C

Prepare closing journal entries.

D

Prepare a post-closing trial balance.

A company makes a deferral adjustment that decreased a liability. This must

mean that a(n):

A

expense account was decreased by the same amount.

B

expense account was increased by the same amount.

C

revenue account was increased by the same amount.

D

revenue account was decreased by the same amount.

When a deferral adjustment is made to an asset account, that asset becomes

a(n):

A

liability.

B

other asset.

C

revenue

D

expense.

At the end of the year, accrual adjustments could include a:

A

debit to an expense and a credit to an asset.

B

credit to a revenue and a debit to an expense.

C

debit to cash and a credit to Common Stock.

D

debit to an expense and a credit to a liability.

One major difference between deferral and accrual adjustments is that:

A

accrual adjustments affect income statement accounts and deferral adjustments affect balance

sheet accounts.

B

deferral adjustments increase net income and accrual adjustments decrease net income.

C

deferral adjustments are made under the cash basis of accounting and accrual adjustments are

made under the accrual basis of accounting.

D

accounts affected by an accrual adjustment always go in the same direction (i.e., both accounts are

increased or both accounts are decreased) and accounts affected by a deferral adjustment always

go in opposite directions (one account is increased and one account is decreased).