Deck 4: Completion of the Accounting Cycle

Question 1

An important purpose of closing entries is to set permanent account balances to zero in order to begin the next period.

Answer 1

False

Question 2

The preparation of reversing entries is a required step in the accounting cycle.

Answer 2

False

Question 3

After the closing entries have been posted, the balance in the owner's capital account should equal the ending balance of the owner's equity account as reported on the balance sheet.

Answer 3

True

Question 4

Adjustments are journalized and posted only at the end of an accounting period, whereas correcting entries are journalized and posted whenever an error is discovered.

Question 5

Current assets are cash and other assets that are converted to cash, sold or used, but not within the coming year.

Question 6

Non-current liabilities such as bank notes payable, mortgages payable, and bonds payable are expected to be paid from existing current assets.

Question 7

The relationship between current assets and current liabilities is important in evaluating a company's liquidity.

Question 8

A work sheet makes it easier to prepare interim (e.g., monthly or quarterly) financial information..

Question 9

The acid test ratio is a test of the company's immediate liquidity.

Question 10

Unearned revenue is an example of a revenue.

Question 11

The work sheet is a type of:

A) financial statement.
B) permanent accounting record.
C) working paper.
D) journal.

Question 12

The proper sequence for the accounting cycle is:

A) analyze, journalize, post, adjust, prepare statements, close.
B) post, journalize, analyze, prepare statements, close, adjust.
C) prepare statements, journalize, post, adjust, close, analyze.
D) journalize, post, close, prepare statements, adjust, analyze.

Question 13

The closing entry for the drawings accounts will require:

A) a debit to income summary.
B) a credit to the capital account.
C) a debit to the drawings account.
D) a debit to the capital account

Question 14

The post-closing trial balance will:

A) be prepared before closing entries are posted to the ledger.
B) contain both income statement and balance sheet accounts.
C) contain only balance sheet accounts.
D) contain only income statement accounts.

Question 15

If current assets are $1,500 and current liabilities are $1,000, the working capital is:

A) ($500).
B) $500.
C) 0.7 to 1.
D) 1.5 to 1.

Question 16

Use this adjusted trial balance to answer the following question.


-Prepare the December 31 closing entries for T. Ball Company.

Question 17

Use this adjusted trial balance to answer the following question.


-Calculate the current ratio and the acid-test ratio for T. Ball Company.

Question 18

Define and give an example of a current liability and a current asset.

Question 19

The following are the nine steps in the accounting cycle. Put the steps in the correct order by writing the correct step number beside each step.
_____ Prepare financial statements
_____ Post to ledger accounts
_____ Analyze business transactions
_____ Journalize and post closing entries
_____ Prepare a trial balance
_____ Prepare an adjusted trial balance
_____ Journalize the transactions
_____ Journalize and post adjusting entries
_____ Prepare a post-closing trial balance

Question 20

Indicate whether the following items are current or non-current items on the balance sheet:
_____ Accounts receivable
_____ Unearned revenue
_____ Prepaid expense
_____ Bonds payable
_____ Interest payable
_____ Goodwill
_____ Interest receivable
_____ Copyright
_____ Mortgage

Question 21

Identify the following accounts as either Temporary (T) or Permanent (P) accounts.
-Prepaid Expenses ______
Accounts Receivable ______
Service Revenue ______
J. Atkins, Capital ______
Rent Expense ______
Unearned Revenue ______
J. Atkins, Drawings ______
Interest Payable ______