11) Which financial statement shows Interest expense?
A) income statement
B) statement of changes in shareholders’ equity
C) statement of cash flows
D) balance sheet
12) Which financial statement shows Interest payable?
A) income statement
B) statement of changes in shareholders’ equity
C) statement of cash flows
D) balance sheet
13) Which financial statement shows Cash paid for interest?
A) income statement
B) statement of changes in shareholders’ equity
C) statement of cash flows
D) balance sheet
14) Which of the following statements best explains why adjustments need to be made at the end of every accounting period?
A) Accountants like to do lots of unnecessary extra work.
B) Certain accounts may need to be updated at the end of the period because of the presence of accruals and deferrals.
C) To correct errors made during the period.
D) Cash may be missing at the end of the period.
15) Adjusting entries are usually recorded at the beginning of every accounting period.
16) The purpose of adjusting entries is to update the account balances at the end of the period.
17) Adjusting entries always affect at least one balance sheet and one income statement account.
18) Adjusting entries cause changes in the balance sheet and statement of cash flows.
19) If supplies have been consumed during the period, but not adjusted at the end of the period, expenses will be understated.
20) If supplies have been consumed during the period, but not adjusted at the end of the period, cash will be understated.
21) Generally accepted accounting principles require the use of accrual accounting.
22) Cash flows from operating activities include cash received from customers for selling goods.
23) If an adjustment related to employee salaries has been made, you would expect to see the Salaries payable account on the income statement.
24) If you see Salaries expense on the income statement, you know that an adjustment related to accrual of employee salaries has been made.
25) Recording revenue before it is earned will overstate net income.