Question

Which of the statements below is NOT true? An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. An adjusted trial balance is prepared before all transactions have been journalized. An adjusted trial balance can be used to prepare financial statements. An adjusted trial balance should show ledger account balances.

B) A furniture factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. According to the expense recognition criteria the overtime wages should be expensed in March. either in February or March depending on when the pay period ends. February. the period when the workers receive their cheques.

Answer 1

For first question:

An adjusted trial balance proves the mathematical accuracy of debits and credits. It can also be used to prepare the financial statements. It also shows the ledger balances.

But it cannot be prepared before the transactions are journalized.

Hence, the incorrect statement is:

An adjusted trial balance is prepared before all transactions have been journalized.

Second Question:

Expense shall be recognised when the respective revenues are recognized.

In the given case, revenue is recognized when sale is made on February 28.

Hence, the expense shall be recognized in February only when the sale is made.

Receipt of payment from the customer shall be ignored while recognizing the revenue.