Question 1

Revenue and expense accounts are permanent (real)accounts and should not be closed at the end of the accounting period.

Accepted Answer

False

Question 2

Permanent accounts carry their balances into the next accounting period.

Accepted Answer

Permanent accounts, also known as real accounts, retain their balances at the end of an accounting period and carry them forward into the subsequent period. Examples of permanent accounts include asset, liability, and equity accounts. On the other hand, temporary accounts, such as revenue and expense accounts, are closed at the end of each accounting period and their balances are transferred to the retained earnings account in the equity section of the balance sheet.

Question 3

Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals account to owner's capital.

Accepted Answer

Closing entries transfer the balances of revenue, expense, and withdrawal accounts to owner's capital.

Question 4

The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.

Accepted Answer

These are the correct first five steps in the accounting cycle.

Question 5

Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use in the next period.

Accepted Answer

Closing revenue and expense accounts transfers their balances to the retained earnings account, which resets them to zero and prepares them for use in the next accounting period.

Question 6

The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.

Accepted Answer

The first step in the accounting cycle is to analyze transactions and events to determine their effects on the financial statements and to prepare for journalizing.

Question 7

If a company plans to continue business into the future, closing entries are not required.

Accepted Answer

Regardless of a company's plans to continue business in the future or not, closing entries are required in order to reset the temporary accounts (revenue, expenses, etc.) for the next accounting period.

Question 8

The closing process is a step in the accounting cycle that prepares accounts for the next accounting period.

Accepted Answer

The closing process is the last step in the accounting cycle and prepares the accounts for the next accounting period by transferring the balances of temporary accounts (revenues, expenses, gains, and losses) to the retained earnings account. This resets the temporary accounts to zero and allows for accurate measurement of the financial performance of the company in the next period.

Question 9

A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.

Accepted Answer

A classified balance sheet includes subgroups such as current assets, long-term assets, current liabilities, and long-term liabilities, allowing for a more detailed analysis of a company's financial position.

Question 10

Revenue accounts are temporary accounts that should begin each accounting period with zero balances.

Accepted Answer

Revenue accounts track the income earned during a specific accounting period, and at the end of the period, their balances are transferred to the retained earnings account. Therefore, they should begin each accounting period with zero balances to accurately reflect the income earned during that specific period.

Question 11

Income Summary is a temporary account only used for the closing process.

Accepted Answer

Income Summary is used to close out revenue and expense accounts at the end of an accounting period, and is not a permanent account on the balance sheet.

Question 12

An unclassified balance sheet provides more information to users than a classified balance sheet.

Accepted Answer

A classified balance sheet provides more detailed information by organizing assets, liabilities, and equity into specific categories, such as current assets and long-term liabilities. This allows users to better understand the composition of the company's financial position. An unclassified balance sheet presents assets, liabilities, and equity in a more general format, without breaking down specific categories.

Question 13

The Income Summary account is a permanent account that will be carried forward period after period.

Accepted Answer

The Income Summary account is a temporary account that is closed at the end of each accounting period. Its balance is transferred to the retained earnings account or the owner's equity account, and it is not carried forward period after period.

Question 14

The closing process takes place before financial statements have been prepared.

Accepted Answer

The closing process takes place after financial statements have been prepared, as it involves adjusting entries to update account balances and prepare the accounts for the next accounting period.

Question 15

Closing entries are necessary so that owner's capital will begin each period with a zero balance.

Accepted Answer

The answer of Closing entries are necessary so that owner's...

Question 16

The last four steps in the accounting cycle include preparing the adjusted trial balance, preparing financial statements, and recording closing and adjusting entries.

Accepted Answer

The answer of The last four steps in the accounting...

Question 17

The accounting cycle refers to the sequence of steps used in preparing the work sheet.

Accepted Answer

The accounting cycle refers to the complete process of recording, classifying, and summarizing business transactions to produce financial statements. The work sheet is only a tool used during the process, but it is not the accounting cycle itself.

Question 18

Accounts that appear in the balance sheet are often called temporary (nominal)accounts.

Accepted Answer

Accounts that appear in the balance sheet are often called permanent (real) accounts. Temporary (nominal) accounts are accounts that relate to a specific accounting period and are closed at the end of that period, such as revenue and expense accounts.

Question 19

Closing entries are required at the end of each accounting period to close all ledger accounts.

Accepted Answer

The answer of Closing entries are required at the end...

Question 20

Closing entries result in the owner's capital account being transferred into net income or net loss for the period ending.

Accepted Answer

The answer of Closing entries result in the owner's capital...

Quiz 4: Completing the Accounting Cycle