Examples of adjusting entries could include all of the following except:

A) Recording interest earned on bank account balances.

B) Recording the expiration of prepaid insurance.

C) Recording unpaid taxes.

D) Recording the purchase of office supplies.

Answer: D

Which of the following regarding adjusting entries is correct?

A) Adjusting entries are recorded for all external transactions.

B) Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the current period.

C) Adjusting entries are needed because we use accrual-basis accounting.

D) After adjusting entries, all temporary accounts should have a balance of zero.

Answer: C

Adjusting entries are primarily needed for:

A) Cash-basis accounting.

B) Accrual-basis accounting.

C) Current value accounting.

D) Manual accounting systems.

Answer: B