Which of the following statements is correct?
A) Prepaid expenses, depreciation, and unearned revenues involve previously recorded assets and liabilities.
B) Accrued expenses and accrued revenues involve assets and liabilities that have not yet been recorded.
C) Adjusting entries are used to record both accrued expenses and accrued revenues
D) Prepaid expenses, depreciation, and unearned revenues require adjusting entries to record the effects of the passage of time.
E) All of these

Question

Quizplus · Accepted Answer

All the statements provided are correct in the context of accounting principles. A) Prepaid expenses, depreciation, and unearned revenues indeed involve previously recorded assets and liabilities that need adjustments as time passes or as earnings are realized. B) Accrued expenses and revenues involve recognizing assets and liabilities that have not yet been recorded in the financial statements, typically because the related cash transaction has not yet occurred. C) Adjusting entries are essential for both accrued expenses and revenues to ensure that the financial statements reflect the true financial position of the company by recognizing these not yet recorded items. D) Adjusting entries for prepaid expenses, depreciation, and unearned revenues are necessary to account for the consumption of prepaid services, the allocation of the cost of tangible assets over their useful lives, and the earning of previously received income, respectively, over time.

Which of the Following Statements Is Correct