Which of the Following Statements Is Incorrect

Multiple Choice

Which of the following statements is incorrect?

A) Adjusting entries affect only balance sheet accounts.
B) Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities.
C) Adjusting entries can be used to record both accrued expenses and accrued revenues.
D) Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time.
E) Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded.