Question

Which of the following is an example of an adjusting entry?

a. recording the increase in the market value of land.
b. recording the receipt of inventory in the last week of the year that will be paid next year.
c. recording the salary expense earned in the last week of the year, to be paid next year.
d. recording the payment of year-end dividends.

Answer 1

An adjusting entry is related to recording the salary expense incurred but not yet paid, at the end of the accounting period. This entry follows the accrual principle of accounting and adjusts both expense and liability accounts accordingly.

Step-by-step explanation:

An adjusting entry is a journal entry made at the end of an accounting period that updates the balances of certain accounts to reflect the true financial position of a business. Among the given options, c. recording the salary expense earned in the last week of the year, to be paid next year is the correct example of an adjusting entry. This is because it represents accrual accounting, where expenses are recognized when incurred, not when paid, and it adjusts the salary expense account and a liability account for salaries payable.