When closing entries are prepared, each income statement account is closed directly to retained earnings.

When closing entries are prepared, each income statement account is closed directly to retained earnings.

False

True

A liability—revenue account relationship exists with an unearned rent revenue adjusting entry.

False

True

The preparation of adjusting entries is:

straightforward because the accounts that need adjustment will be out of balance.

needed to ensure that the expense recognition principle is followed.

only required for accounts that do not have a normal balance.

optional when financial statements are prepared.