Chapter 3, Problem 1MC

To determine

Identify the name of end-of-period journal entry that reflects the accrual accounting.

Answer to Problem 1MC

Option b

Explanation of Solution

Adjusting entries:  Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity) to maintain the records according to accrual basis principle.

Justification for correct answer:

Option (b): Adjusting entries (also known as end of period adjustments) are journal entries that are made at the end of an accounting period to adjust the accounts to accurately reflect the revenues and expenses of the current period.

Justification for incorrect answers:

Option (a): Post journal entries is the course of transferring recorded business events from the general journal to the ledger. Therefore, option (a) is incorrect.

Option (c): Erroneous journal entry is made to fix the error that has been recorded. Therefore, option (c) is incorrect.

Option (d): Compound journal entry is an accounting entry that has more than one debit, more than one credit. Therefore, option (d) is incorrect.

Conclusion

Hence, Option (b) is the correct answer.