Deck 4: Completing the Accounting Cycle

Question 1

Common stock and dividends are reported in the stockholders' equity section of the balance sheet.

Answer 1

False

Question 2

After analyzing transactions, the next step would be to post the transactions in the ledger.

Answer 2

False

Question 3

There is really no benefit in preparing financial statements in any particular order.

Answer 3

False

Question 4

Accrued taxes payable are generally reported on the balance sheet as a current liability.

Question 5

When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are simply added to the account title column.

Question 6

Liabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities.

Question 7

Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets.

Question 8

Office Equipment is an example of a current asset account.

Question 9

The amount of the net income for a period appears on both the income statement and the balance sheet for that period.

Question 10

Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets.

Question 11

The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet.

Question 12

Cross-referencing is useful in assuring that the debits and credits are in balance.

Question 13

Accrued expenses are ordinarily listed on the balance sheet as current assets.

Question 14

Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets.

Question 15

On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount.

Question 16

Land is an example of a plant asset.

Question 17

The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.

Question 18

Prepaid Insurance is an example of a current asset.

Question 19

The usual presentation of the retained earnings statement is 1) Beginning balance, 2) Net income or loss, 3) Dividends, 4) Stockholders' contributions, 5) Ending balance.

Question 20

Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements.

Question 21

Journalizing and posting closing entries must be completed before financial statements can be prepared.

Question 22

The dividends account is a temporary account.

Question 23

During the closing process, some balance sheet accounts are closed and end the period with a zero balance.

Question 24

The income summary account is closed to the retained earnings account.

Question 25

The accumulated depreciation account is closed to the income summary account.

Question 26

A post-closing trial balance contains only asset and liability accounts.

Question 27

Assets, liabilities, and stockholders' equity accounts are real accounts and do not get closed at the end of the period.

Question 28

The dividends account is closed to the income summary account.

Question 29

Journalizing and posting the adjustments and closing entries update the ledger for the new accounting period.

Question 30

Accrued revenues are ordinarily listed on the balance sheet as current liabilities.

Question 31

Accumulated Depreciation is a permanent account.

Question 32

The balance sheet accounts are referred to as real or permanent accounts.

Question 33

Examples of temporary accounts are Supplies and Prepaid Expenses, which are in the ledger for just a short time before they expire.

Question 34

The post-closing trial balance will generally have fewer accounts than the trial balance.

Question 35

The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance.

Question 36

The income summary account is also known as the clearing account.

Question 37

A post-closing trial balance should be prepared before the financial statements are prepared.

Question 38

All income statement accounts will be closed at the end of the period.

Question 39

Closing entries are entered directly on to the work sheet.

Question 40

Entries required to close the balances of the temporary accounts at the end of the period are called final entries.

Question 41

Real accounts are not permanent accounts.

Question 42

The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period.

Question 43

The accounting cycle begins with preparing an unadjusted trial balance.

Question 44

The closing process is sometimes referred to as closing the books.

Question 45

The most important output of the accounting cycle is the financial statements.

Question 46

Financial statements should be prepared before the closing entries are journalized and posted.

Question 47

Accounts reported on the balance sheet that are carried forward from year to year are known as permanent accounts.

Question 48

Once an account has been closed for the period, inserting a line in the balance columns zeros out the account, making it ready for the following period.

Question 49

It is not necessary to post the closing entries to the general ledger.

Question 50

The totals of the Adjusted Trial Balance columns on a work sheet will always be the sum of the Trial Balance column totals and the Adjustments column totals.

Question 51

The balances of the equity accounts from the Adjusted Trial Balance of the work sheet are extended to the Retained Earnings Statement columns.

Question 52

Any twelve-month accounting period adopted by a company is known as its fiscal year.

Question 53

Balance sheet accounts are not considered real accounts.

Question 54

A fiscal year that ends when business activities have reached their lowest point is called the natural business year.

Question 55

The majority of businesses end their fiscal year on December 31.

Question 56

The work sheet is a working paper that accountants can use to summarize adjusting entries and the account balances for the financial statements.

Question 57

The trial balance may be listed on the work sheet instead of being prepared separately.

Question 58

The last step of the accounting cycle is to prepare a post-closing trial balance.

Question 59

The work sheet is not considered a part of the formal accounting records.

Question 60

All companies must use a calendar year as their fiscal year.

Question 61

Prepaid insurance is reported on the balance sheet as a

A) current asset
B) fixed asset
C) current liability
D) long-term liability

Question 62

Unearned Fees appear on the

A) balance sheet in the current assets section
B) balance sheet as a current liability
C) balance sheet in the shareholders' equity section
D) income statement as revenue

Question 63

The statement of retained earnings should be prepared

A) before the income statement and after the balance sheet
B) before the income statement and balance sheet
C) after the income statement and balance sheet
D) after the income statement and before the balance sheet

Question 64

Net income is shown on the work sheet in the Income Statement debit column and the Balance Sheet credit column.

Question 65

After the account balances have been extended from the Adjusted Trial Balance columns on the work sheet, the difference between the initial totals of the Balance Sheet debit and credit columns is Net Income or Net Loss.

Question 66

Once the adjusting entries are posted, the adjusted trial balance is prepared to

A) verify that the debits and credits are in balance
B) verify that the net income correctly flows into the statement of shareholders' equity from the income statement
C) verify that the net income loss) is correct for the period
D) verify the correct flow of accounts into the financial statements

Question 67

Which one of the fixed asset accounts listed below will not have a related contra asset account?

A) Office Equipment
B) Land
C) Delivery Equipment
D) Building

Question 68

The income statement is prepared from

A) the adjusted trial balance
B) the Income Statement columns of the end-of-period spreadsheet
C) either the adjusted trial balance or the Income Statement columns of the end-of-period spreadsheet
D) both the adjusted trial balance and the Income Statement columns of the end-of-period spreadsheet

Question 69

Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger.

Question 70

A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the Balance Sheet columns.

Question 71

A work sheet heading is dated for a period of time.

Question 72

On the work sheet, the common stock and dividends account balances are extended to the Balance Sheet columns.

Question 73

When preparing the statement of shareholders' equity, the beginning capital balance can always be found

A) in the Income Statement columns of the work sheet
B) in the statement of cash flows
C) in the general ledger
D) in the Balance Sheet columns of the work sheet

Question 74

If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000.

Question 75

Notes receivable due in 390 days appear on the

A) balance sheet in the current assets section
B) balance sheet in the noncurrent assets section
C) balance sheet in the current liabilities section
D) income statement as an expense

Question 76

After Net Income or Loss is entered on the work sheet, the debit column total must equal the credit column total for the Balance Sheet pair of columns.

Question 77

The first item appearing on the statement of retained earnings is

A) net income
B) the ending balance of retained earnings
C) dividends
D) the beginning balance of retained earnings

Question 78

Accumulated Depreciation appears on the

A) balance sheet in the current assets section
B) balance sheet in the property, plant, and equipment section
C) balance sheet in the long-term liabilities section
D) income statement as an operating expense

Question 79

What is the major difference between the unadjusted trial balance and the adjusted trial balance?

A) The adjusted trial balance will show the net income loss) as an additional account.
B) Unlike the adjusted trial balance, the unadjusted trial balance will continue with the end-of-period processing even if it is not in balance.
C) The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts.
D) The adjusted trial balance will be used to record the adjustments for the period.

Question 80

The chart of accounts, the journal, and the ledger are essential parts of the accounting system.