Deck 5: Completion of Theaccounting Cycle

Question 1

The information for preparing a trial balance on a work sheet is obtained from

A)financial statements.
B)general ledger accounts.
C)general journal entries.
D)business documents.

Answer 1

B

Question 2

The final closing entry to be journalized is typically the entry that closes the

A)revenue accounts.
B)Dividends account.
C)Retained Earnings account.
D)expense accounts.

Answer 2

C

Question 3

The adjusted trial balance columns of a work sheet are obtained by subtracting the adjustment columns from the trial balance columns.

Answer 3

False

Question 4

The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance.

Question 5

The closing entry process consists of closing

A)all asset and liability accounts.
B)out the Retained Earnings account.
C)all permanent accounts.
D)all temporary accounts.

Question 6

In preparing closing entries

A)each revenue account will be credited.
B)each expense account will be credited.
C)the Retained Earnings account will be debited if there is net income for the period.
D)the Dividends account will be debited.

Question 7

The net income (or loss) for the period

A)is found by computing the difference between the income statement credit column and the balance sheet credit column on the work sheet.
B)cannot be found on the work sheet.
C)is found by computing the difference between the income statement columns of the work sheet.
D)is found by computing the difference between the trial balance totals and the adjusted trial balance totals.

Question 8

Closing entries are made

A)in order to terminate the business as an operating entity.
B)so that all assets, liabilities, and stockholders' equity accounts will have zero balances when the next accounting period starts.
C)in order to transfer net income (or loss) and dividends to the Retained Earnings account.
D)so that financial statements can be prepared.

Question 9

Closing entries are

A)an optional step in the accounting cycle.
B)posted to the ledger accounts from the work sheet.
C)made to close permanent or real accounts.
D)journalized in the general journal.

Question 10

When using a work sheet, adjusting entries are journalized

A)after the work sheet is completed and before financial statements are prepared.
B)before the adjustments are entered onto the work sheet.
C)after the work sheet is completed and after financial statements have been prepared.
D)before the adjusted trial balance is extended to the proper financial statement columns.

Question 11

The accounting cycle begins at the start of a new accounting period.

Question 12

Closing entries are journalized and posted

A)before the financial statements are prepared.
B)after the financial statements are prepared.
C)at management's discretion.
D)at the end of each interim accounting period.

Question 13

After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances.

Question 14

A liability is classified as a current liability if it is to be paid from current assets within the next year or operating cycle, whichever is longer.

Question 15

Closing entries

A)are prepared before the financial statements.
B)reduce the number of permanent accounts.
C)cause the revenue and expense accounts to have zero balances.
D)summarize the activity in every account.

Question 16

Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period.

Question 17

If the total debit column exceeds the total credit column of the income statement columns on a work sheet, then the company has

A)earned net income for the period.
B)an error because debits do not equal credits.
C)suffered a net loss for the period.
D)to make an adjusting entry.

Question 18

If total credits in the income statement columns of a work sheet exceed total debits, the enterprise has net income.

Question 19

Closing entries are journalized after adjusting entries have been journalized.

Question 20

The Dividends account is a permanent account whose balance is carried forward to the next accounting period.

Question 21

The balance in the Income Summary account before it is closed will be equal to

A)the net income or loss on the income statement.
B)the beginning balance in the Retained Earnings account.
C)the ending balance in the Retained Earnings account.
D)zero.

Question 22

Which of the following depicts the proper sequence of steps in the accounting cycle?

A)Journalize the transactions, analyze business transactions, prepare a trial balance
B)Prepare a trial balance, prepare financial statements, prepare adjusting entries
C)Prepare a trial balance, prepare adjusting entries, prepare financial statements
D)Prepare a trial balance, post to ledger accounts, post adjusting entries

Question 23

An error has occurred in the closing entry process if

A)revenue and expense accounts have zero balances.
B)the Retained Earnings account is credited for the amount of net income.
C)the Dividends account is closed to the Retained Earnings account.
D)the balance sheet accounts have zero balances.

Question 24

The four major classifications of assets in a classified balance sheet are: _______________, _______________, _______________ and _______________.

Question 25

The report form of the balance sheet

A)is identical to the account form.
B)lists the asset section to the left and the liabilities and stockholders' equity sections to the right.
C)shows assets above liabilities and stockholders' equity.
D)lists assets to the left, liabilities in the middle, and stockholders' equity to the right.

Question 26

After all closing entries have been journalized and posted, the final step in the accounting cycle is to prepare a ______________ trial balance.

Question 27

A correcting entry

A)must involve one balance sheet account and one income statement account.
B)is another name for a closing entry.
C)may involve any combination of accounts.
D)is a required step in the accounting cycle.

Question 28

The purpose of the post-closing trial balance is to

A)prove that no mistakes were made.
B)prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
C)prove the equality of the income statement account balances that are carried forward into the next accounting period.
D)list all the balance sheet accounts in alphabetical order for easy reference.

Question 29

The ______________ of a company is the average length of time that is required to go from cash to cash in producing revenues.

Question 30

A post-closing trial balance will show

A)only permanent account balances.
B)only temporary account balances.
C)zero balances for all accounts.
D)the amount of net income (or loss) for the period.

Question 31

A current asset is

A)the last asset purchased by a business.
B)an asset which is currently being used to produce a product or service.
C)usually found as a separate classification in the income statement.
D)expected to be realized in cash, sold or consumed within one year of the balance sheet or the company's operating cycle, whichever is longer.

Question 32

Tom's Tourist Company received a $750 check from a customer for the balance due.The transaction was erroneously recorded as a debit to Cash $570 and a credit to Service Revenue $570.The correcting entry is

A)Debit Cash, $750; Credit Accounts Receivable, $750.
B)Debit Cash, $180 and Accounts Receivable, $570; Credit Service Revenue, $750.
C)Debit Cash, $180 and Service Revenue, $570; Credit Accounts Receivable, $750.
D)Debit Accounts Receivable, $750; Credit Cash, $180 and Service Revenue, $570.

Question 33

The final step in the accounting cycle is to prepare

A)closing entries.
B)financial statements.
C)a post-closing trial balance.
D)adjusting entries.

Question 34

At the end of an accounting period, all revenue and expense accounts are closed to a temporary account called ______________.

Question 35

The first step in preparing a work sheet is to prepare a ______________ from the general ledger accounts.

Question 36

The first required step in the accounting cycle is

A)reversing entries.
B)journalizing transactions in the book of original entry.
C)analyzing transactions.
D)posting transactions.

Question 37

Liabilities are generally classified on a balance sheet as

A)small liabilities and large liabilities.
B)present liabilities and future liabilities.
C)tangible liabilities and intangible liabilities.
D)current liabilities and long-term liabilities.

Question 38

A double rule applied to accounts in the ledger during the closing process implies that

A)the account is an income statement account.
B)the account is a balance sheet account.
C)the account balance is not zero.
D)a mistake has been made, since double ruling is prescribed.

Question 39

Which of the following would not be classified as a long-term liability?

A)Current maturities of long-term debt
B)Bonds payable
C)Mortgage payable
D)Lease liabilities

Question 40

An intangible asset

A)derives its value from the rights and privileges it provides the owner.
B)is worthless because it has no physical substance.
C)is converted into a tangible asset during the operating cycle.
D)cannot be classified on the balance sheet because it lacks physical substance.