Deck 4: Completion of the Accounting Cycle

Question 1

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

Answer 1

True

Question 2

Correcting entries will only be done at the same time as the adjusting entries are being prepared.

Answer 2

False

Question 3

The owner's drawings account is a permanent account whose balance is carried forward to the next accounting period.

Answer 3

False

Question 4

Reversing Entries are an optional part of the accounting cycle.

Question 5

An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting entry because total assets will not be misstated.

Question 6

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

Question 7

Cash is a temporary account and it should be zero after all closing entries have been posted.

Question 8

Closing entries are an optional part of the accounting cycle.

Question 9

A company has only one accounting cycle over its economic existence.

Question 10

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

Question 11

Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.

Question 12

The owner's drawings account is closed to the Income Summary account in order to properly determine Profit (or loss) for the period.

Question 13

Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account.

Question 14

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

Question 15

The final step in the accounting cycle is the pre-closing trial balance.

Question 16

After the closing entries are posted to the accounts, a trial balance will show balances only in the Balance Sheet Accounts.

Question 17

Closing entries are journalized after adjusting entries have been journalized.

Question 18

Closing the drawings account to Capital is not necessary if profit is greater than owner's drawings during the period.

Question 19

Closing entries are necessary if the business plans to continue operating in the future and issue financial statements each year.

Question 20

In a post closing trial balance the profit of the business will be one of the temporary accounts.

Question 21

If a company has a loss in the period, the amount of the loss will appear in the income statement credit column and the balance sheet debit column of the work sheet.

Question 22

A liability is classified as a current liability if it is to be settled within one year from the balance sheet date or in the company's normal operating cycle.

Question 23

The difference between current assets and current liabilities is called working capital.

Question 24

Long-term investments would appear in the property, plant, and equipment section of the balance sheet.

Question 25

Abbott Manufacturing Company's current ratio is 2:1. The company has $50,000 in current liabilities; current assets must be $25,000.

Question 26

It is not necessary to prepare formal financial statements if a work sheet has been prepared because financial position and profit are shown on the work sheet.

Question 27

Under International Financial Reporting Standards, current assets may be shown after non current assets on the Balance Sheet.

Question 28

Cash and office supplies are both classified as current assets.

Question 29

A reversing entry is made at the beginning of the next accounting period and is the exact opposite of the adjusting entry that was made in the previous period.

Question 30

All Canadian public companies must follow International Financial Reporting Standards.

Question 31

Drawings will appear in the balance sheet debit column of a work sheet.

Question 32

Another name for Balance Sheet is the Statement of Financial Position.

Question 33

The balance of the Depreciation Expense account will appear in the income statement debit column of a work sheet.

Question 34

Common Canadian practice shows current assets as the first items listed on a classified balance sheet.

Question 35

The current ratio is the ratio of current liabilities divided by current assets.

Question 36

If a work sheet is used, financial statements can be prepared before adjusting entries are journalized.

Question 37

Current assets are normally listed in the balance sheet in order of permanency.

Question 38

The acid-test ratio is a measure of a company's long term liquidity.

Question 39

The adjustments on a work sheet can be posted directly to the accounts in the ledger from the work sheet.

Question 40

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

Question 41

Which of the following is a true statement about closing the books of a proprietorship?

A) Expenses are closed to the owner's drawings account.
B) Only revenues are closed to the Income Summary account.
C) Only revenues and expenses are closed to the Income Summary account.
D) Revenues, expenses, and the owner's drawings account are closed to the Income Summary account.

Question 42

Closing entries are journalized in the

A) trial balance.
B) general journal.
C) general ledger.
D) chart of accounts.

Question 43

An error has occurred in the closing entry process if

A) the revenue and expense accounts have zero balances.
B) the owner's capital account is credited for the amount of profit.
C) the owner's drawings account is closed to the owner's capital account.
D) the balance sheet accounts have zero balances.

Question 44

In order to close a revenue account, the

A) income summary account should be credited.
B) income summary account should be debited.
C) owner's drawings account should be credited.
D) owner's drawings account should be debited.

Question 45

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) close all of the permanent accounts.

Question 46

The owner's capital account is

A) a permanent account.
B) closed to the owner's drawings account at the end of the accounting period.
C) closed to the Income Summary account at the end of the accounting period.
D) a temporary account.

Question 47

In order to close the owner's drawings account, the

A) income summary account should be debited.
B) income summary account should be credited.
C) owner's capital account should be credited.
D) owner's capital account should be debited.

Question 48

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 profit (or loss) for the period.

Question 49

Closing entries are made

A) in order to terminate the business as an operating entity.
B) so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts.
C) in order to transfer Profit (or loss) and owner's drawings to the owner's capital account.
D) so that financial statements can be prepared.

Question 50

In preparing closing entries

A) every revenue account will be credited.
B) every expense account will be credited.
C) the owner's capital account will be debited if there is profit for the period.
D) the owner's drawings account will be debited.

Question 51

A post-closing trial balance should be prepared

A) before closing entries are posted to the ledger accounts.
B) after closing entries are posted to the ledger accounts.
C) before adjusting entries are posted to the ledger accounts.
D) after adjusting entries are posted to the ledger accounts.

Question 52

When is a post-closing trial balance prepared?

A) when reversing entries are required
B) after adjusting entries but before closing entries
C) after both adjusting and closing entries have been posted
D) after the balance sheet has been prepared

Question 53

After closing entries are posted, the balance in the owner's capital account in the ledger will be equal to

A) the beginning owner's capital reported on the statement of owner's equity.
B) the amount of the owner's capital reported on the balance sheet.
C) zero.
D) the profit (or loss) for the period.

Question 54

Closing entries are journalized and posted

A) before the financial statements are prepared.
B) after the financial statements are prepared.
C) when the business is closing its doors.
D) at the end of each interim accounting period.

Question 55

The closing entry process consists of closing

A) all asset and liability accounts.
B) out the owner's capital account.
C) all permanent accounts.
D) all temporary accounts.

Question 56

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 57

Reversing Entries are more relevant in corporations.

Question 58

To close the depreciation expense account

A) income summary is debited and owner's capital is credited.
B) income summary is debited and the depreciation expense is credited.
C) income summary is credited and the owner's capital is debited.
D) income summary is credited and the depreciation expense is debited.

Question 59

Which of the following is an example of a temporary account that will be closed to Income Summary at the end of the accounting period?

A) Accumulated Depreciation
B) Land
C) Accounts Payable
D) Service Revenue

Question 60

The balance in the owner's drawings account after all closing entries have been posted will be equal to

A) zero.
B) the profit (or loss) for the period.
C) the cash withdrawn by the owner during the period.
D) the balance in the Owner's Capital account.

Question 61

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 62

Carr Company paid the weekly payroll on January 2 by debiting Wages Expense for $40,000. The accountant preparing the payroll entry overlooked the fact that Wages Expense of $24,000 had been accrued at year end on December 31. The correcting entry is

Question 63

Crimmins Boats paid a $350 cheque to a supplier for the balance due on an account payable. The transaction was erroneously recorded as a credit to cash of $530 and a debit to Repairs Expense of $530. The correcting entry is

A) debit Accounts Payable $350; credit Cash $350
B) debit Accounts Payable $180; credit Cash $180
C) debit Cash $180; debit Accounts Payable $350, credit Repairs Expense $530
D) debit Cash $350; debit Accounts Payable $180 credit Repairs Expense $530

Question 64

On January 1, Robert Auto Repair Shop purchased parts on account for $800. Robert paid the entire balance on January 31 and recorded the payment by debiting Supplies for $800 and crediting Cash for $800. On the January 31 financial statements

A) assets and expenses will be understated.
B) assets and liabilities will be overstated.
C) expenses and liabilities will be overstated.
D) assets and liabilities will be understated.

Question 65

The Singh Company paid $630 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $360 and a credit to Accounts Receivable, $360. The correcting entry is

Question 66

The Saint John River Company received $630 on account from a customer. The transaction was erroneously recorded as a debit to Cash of $360 and a credit to Accounts Payable, $360. The correcting entry is

Question 67

If errors occur in the recording process, they

A) should be corrected as adjustments at the end of the period.
B) should be corrected as soon as they are discovered.
C) should be corrected when preparing annual financial statements.
D) cannot be corrected until the next accounting period.

Question 68

On August 1, Rothesay Boat Club provided services on account for $800. Rothesay received the entire balance on August 31 and recorded the payment by debiting Cash for $800 and crediting Service Revenue for $800. On the August 31 financial statements

A) assets and revenues will be understated.
B) assets and liabilities will be overstated.
C) assets and revenue will be overstated.
D) assets and liabilities will be understated.

Question 69

The balances that appear on the post-closing trial balance will match the

A) income statement account balances after adjustments.
B) balance sheet account balances after closing entries.
C) income statement account balances after closing entries.
D) balance sheet account balances after adjustments.

Question 70

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 71

Which one of the following is an optional step in the accounting cycle of a business enterprise?

A) Analyze business transactions.
B) Prepare a work sheet.
C) Prepare a trial balance.
D) Post to the ledger accounts.

Question 72

Jasmine Company received a $350 cheque from a customer for the balance due on an accounts receivable. The transaction was erroneously recorded as a debit to cash of $530 and a credit to service revenue of $530. The correcting entry is

A) debit Accounts Receivable $350; credit Cash $350
B) debit Accounts Receivable $180; credit Cash $180
C) debit Service Revenue $530; credit Cash $180; credit Accounts Receivable $350
D) debit Service Revenue $530; credit Cash $350; credit Accounts Receivable $180

Question 73

Which of the following steps in the accounting cycle may be performed more frequently than annually?

A) Prepare a post-closing trial balance.
B) Journalize closing entries.
C) Post closing entries.
D) Prepare a trial balance.

Question 74

A post-closing trial balance will show

A) zero balances for all accounts.
B) zero balances for balance sheet accounts.
C) only balance sheet accounts.
D) only income statement accounts.

Question 75

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 76

Which of the following steps in the accounting cycle would NOT generally be performed daily?

A) Journalize transactions.
B) Post to ledger accounts.
C) Prepare adjusting entries.
D) Analyze business transactions.

Question 77

The purpose of the post-closing trial balance is to

A) ensure that all adjusting entries 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 78

The heading for a post-closing trial balance has a date line that is similar to the one found on

A) a balance sheet.
B) an income statement.
C) a statement of owner's equity.
D) the work sheet.

Question 79

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 80

The two optional steps in the accounting cycle are preparing

A) a post-closing trial balance and reversing entries.
B) a work sheet and post-closing trial balances.
C) reversing entries and a work sheet.
D) an adjusted trial balance and a post-closing trial balance.