Deck 4: Completing the Accounting Cycle

Question 1

Prepaid Insurance is an example of a current asset.

Answer 1

True

Question 2

Office Equipment is an example of a current asset account.

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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 7

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 8

Land is an example of a plant asset.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire.

Question 15

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 16

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

Question 17

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

Question 18

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

Question 19

Capital and drawing are reported in the owner's equity section of the balance sheet.

Question 20

The usual presentation of the statement of owner's equity is
(1)Beginning capital,
(2)Net income or loss,
(3)Drawing,
(4)Owner's contributions,and
(5)Ending capital.

Question 21

Accumulated Depreciation is a permanent account.

Question 22

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

Question 23

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

Question 24

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

Question 25

The accumulated depreciation account is closed to the drawing account.

Question 26

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

Question 27

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

Question 28

Balance sheet accounts are not considered real accounts.

Question 29

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

Question 30

The drawing account is a temporary account.

Question 31

Real accounts are not permanent accounts.

Question 32

The drawing account is debited in the closing entry.

Question 33

Net income is closed to the owner's capital account.

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

Assets,liabilities,and owner's capital are real accounts and do not get closed at the end of the period.

Question 40

Closing entries are entered directly on to the work sheet.

Question 41

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

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 ability of a business to pay its debts is called solvency.

Question 46

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

Question 47

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

Question 48

The current ratio is computed by dividing current liabilities by current assets.

Question 49

Any 12-month accounting period adopted by a company is known as its fiscal year.

Question 50

The ability to convert assets into cash is called liquidity.

Question 51

The current ratio is more useful than working capital in making comparisons across companies.

Question 52

Working capital is the excess of the current liabilities of a business over its current assets.

Question 53

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

Question 54

Current assets and current liabilities for Brayden Company are as follows:​​ The change in the current ratio from 20Y8 to 20Y9 was favorable.

Question 55

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

Question 56

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 57

Current assets and current liabilities for Brayden Company are as follows:​​ The change in working capital from 20Y8 to 20Y9 indicates that Brayden will no longer be solvent.

Question 58

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

Question 59

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

Question 60

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

Question 61

The balance in the capital account on the worksheet will equal the amount presented in the balance sheet.

Question 62

Reversing entries are recorded after adjusting entries have been recorded and before closing entries are recorded for the same period.

Question 63

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 64

The balances of the capital accounts from the Adjusted Trial Balance columns of the work sheet are extended to the Statement of Owner's Equity columns.

Question 65

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

Question 66

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 67

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 68

On the work sheet,the capital and drawing account balances are extended to the Balance Sheet columns.

Question 69

Accrued fees earned are recorded during the adjusting process.The reversing entry will leave a debit balance in Fees Earned as of the first day of the next period.

Question 70

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

Question 71

A reversing entry reverses the effects of an adjusting entry from the previous period.​

Question 72

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 73

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

Question 74

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

Question 75

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

Question 76

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 77

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 78

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 79

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

Question 80

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