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Multiple EXAM 2 - Why is it necessary to make adjusting...

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Why is it necessary to make adjusting entries? a. The accountant has made errors in recording external transactions. b. Certain facts about the affairs of the business are not included in the ledger as built up from externa Note: This answer is stated poorly, but I believe what it is trying to say is that "external transactions over time and must be recognized as an adjustment at the end of a period. c. The accountant wants to show the largest possible net income for the period. d. The accountant wants to show the net cash flow for the year. Notes to financial statements should not be used to a. describe the nature and effect of a change in accounting principles. b. identify substantial differences between book and tax income. c. correct an improper financial statement presentation. d. indicate basis for asset valuation. The characteristic of consistency is best demonstrated when a. expenses are reported as charges against the period in which incurred. b. the effect of changes in accounting procedure is properly disclosed. Consistency: The idea that unless otherwise noted, the same accounting theories and practices have been utilised from period to period. c. extraordinary gains and losses are not reported on the income statement. d. accounting procedures are adopted which give a consistent rate of net income. The current assets section of a balance sheet should never include a.a receivable from a customer not collectible for over one year. b. the premium paid on short-term bond investment. c. goodwill arising from the purchase of a going business. d. customers' accounts with credit balances. When should the loss on an uncollectible account receivable be recorded as an expense for accrual a a. When it is determined that an account cannot be collected. b. In the same period in which the sale on account occurs.
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