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Every adjusting entry must affect at least one account from each of which two groups?
AOne asset account and one separate liability account in all cases
BOne profit-or-loss account and one statement-of-financial-position account
CThe cash account and one revenue account in every adjusting entry
DTwo equity accounts that always close out at the period end
Answer & Solution
Correct answer: B. One profit-or-loss account and one statement-of-financial-position account
1. Each adjusting entry always affects at least one income statement account (revenue or expense).
2. It also affects at least one balance sheet account (asset or liability).
3. In IFRS terms these are a profit-or-loss account and a statement-of-financial-position account, so B is correct.
4. Adjusting entries never touch cash (ruling out C), and need not pair two assets/liabilities (A) or two equity accounts (D).
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.2.1 "Adjusting Entries", p.55_