Question 1

Reversing entries are optional.

Accepted Answer

Reversing entries are optional and can be used in certain situations to help simplify the accounting process. They are not required by generally accepted accounting principles (GAAP).

Question 2

The aim of a post-closing trial balance is to verify that (1)total debits equal total credits for temporary accounts, and (2)all temporary accounts have zero balances.

Accepted Answer

The answer of The aim of a post-closing trial balance...

Question 3

All necessary amounts to prepare the balance sheet, including ending owner's capital, can be found in the Balance Sheet columns of the work sheet.

Accepted Answer

The answer of All necessary amounts to prepare the balance...

Question 4

An expense account is normally closed by debiting Income Summary and crediting the expense account.

Accepted Answer

This is correct. When closing an expense account, its balance is transferred to Income Summary by debiting Income Summary and crediting the expense account.

Question 5

When there is a net loss, the Income Summary account would have a credit balance.

Accepted Answer

The answer of When there is a net loss, the...

Question 6

If all columns of a completed work sheet balance, you can be sure that no errors were made in its preparation.

Accepted Answer

While balancing the columns is one step to ensure accuracy, it does not guarantee that there are no errors in the worksheet. Other mistakes, such as using incorrect formulas or entering wrong numbers, could still be present even if the columns balance.

Question 7

A company's post-closing trial balance has total debits of $40,560 and total credits of $40,650. Accordingly, the company should review for errors in the closing process.

Accepted Answer

The total credits should equal the total debits in the post-closing trial balance in order to confirm that the closing process was completed correctly. In this case, there is a difference of $90 between the total debits and the total credits, indicating that an error may have occurred. The company should review their closing entries to identify and correct any mistakes.

Question 8

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Owner's Equity Credit column.

Accepted Answer

The answer of On the work sheet, net income is...

Question 9

During the closing process, Owner's Capital is closed to the Owner's Withdrawals account.

Accepted Answer

The answer of During the closing process, Owner's Capital is...

Question 10

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

Accepted Answer

The answer of The Income Summary account is used to...

Question 11

After posting the entries to close all revenue and expense accounts, Marker Company's Income Summary account has a credit balance of $6,000, and its Marker, Withdrawals account has a debit balance of $2,500. These balances indicate that net income for the current accounting period amounted to $3,500.

Accepted Answer

The answer of After posting the entries to close all...

Question 12

Normally closing entries are first entered in the general journal and then posted to the work sheet.

Accepted Answer

The answer of Normally closing entries are first entered in...

Question 13

After posting the entries to close all revenue and expense accounts, the Income Summary account of Cleaver Auto Services has a $4,000 debit balance. This result implies that Cleaver earned a net income of $4,000.

Accepted Answer

The $4,000 debit balance in the Income Summary account indicates that the total expenses exceeded the total revenues, resulting in a net loss of $4,000, not a net income. To have a net income, the Income Summary account should have a credit balance.

Question 14

The steps in the closing process are (1)close credit balances in revenue accounts to Income Summary; (2)close debit balances in expense accounts to Income Summary; (3)close Income Summary to Owner's Capital; (4)close Withdrawals to Owner's Capital.

Accepted Answer

This is the correct sequence of steps in the closing process.

Question 15

A worksheet can be helpful in showing the effects of proposed or "what if" transactions but not in helping to prepare interim financial statements.

Accepted Answer

The answer of A worksheet can be helpful in showing...

Question 16

A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.

Accepted Answer

This statement is true. The post-closing trial balance is created after all temporary accounts have been closed and their balances transferred to the retained earnings account, leaving only permanent accounts with balances.

Question 17

Adjusting entries are usually entered in the work sheet before they are entered in the general journal.

Accepted Answer

Adjusting entries are made in the work sheet first to ensure that the accounting records are accurate before the financial statements are prepared. Once the adjustments are finalized, they can be recorded in the general journal and posted to the ledger accounts.

Question 18

The withdrawals account is normally closed by debiting it.

Accepted Answer

The answer of The withdrawals account is normally closed by...

Question 19

On a work sheet, the adjusted balances of revenues and expenses are sorted to the Income Statement columns of the work sheet.

Accepted Answer

The purpose of sorting the adjusted balances of revenues and expenses is to transfer them to the Income Statement columns of the work sheet.

Question 20

Because it is a necessary financial statement, the work sheet must be prepared according to specified accounting procedures.

Accepted Answer

The answer of Because it is a necessary financial statement,...

Quiz 4: Completing the Accounting Cycle