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Adjusting entries fall into two broad types. Which pairing correctly names them?
ADebits and credits
BDeferrals and accruals
CReceivables and payables
DRevenues and expenses
Answer & Solution
Correct answer: B. Deferrals and accruals
1. There are two types of adjusting entries: deferrals and accruals.
2. Deferrals may be deferred expenses or deferred revenue; accruals may be accrued expenses or accrued revenue.
3. Therefore B is correct.
4. A names entry sides, C names account categories, and D names statement elements, none of which are the two adjusting-entry types.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.3 "Adjusting Entries", p.57_