Question

"Of the six typical adjusting journal entries found in chapter three and described in a previous discussion, which of the six is likely to have the largest financial impact of a company’s income statement?

When we look a major corporation like Disney, General Motors or Federal Express, one of the AJEs (adjusting journal entries) will have impact likely in the hundreds of million dollars.

Which of the six is likely to have the largest financial impact of a company’s income statement, and of course, please explain why?"

So, I believe the six types to be

Prepaid Expense adjustment

Supply Inventory adjustment

Depreciation adjustment

Accrued Expense adjustment

Accrued Revenue adjustment

Unearned Revenue adjustment

Answer 1

Answer : Depreciation Adjustment will have the largest impact

Reason

As big corporations like Disney, General Motors etc have a million billion dollars investment in the plant equipment and property so depreciation on these assets values usually runs into millions of dollars when calculated so adjustment entry passed for the depreciation adjustment will have the largest impact on the financial statements of the company

Hence our answer is Depreciation adjustment