Question 1

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

Accepted Answer

Permanent accounts are not closed at the end of the period; only temporary accounts are closed to reset their balances to zero for the next accounting period.

Question 2

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

Accepted Answer

Reversing entries are optional and are used to simplify the recording of transactions in the new accounting period.

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.

Accepted Answer

The owner's capital account reflects the owner's equity in the business, and after closing entries, it should match the ending balance of the owner's equity on the balance sheet.

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.

Accepted Answer

Adjustments are typically made at the end of an accounting period to update accounts before financial statements are prepared, while correcting entries can be made at any time to fix errors as they are identified.

Question 5

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

Accepted Answer

Current assets are expected to be converted to cash, sold, or used within one year or the operating cycle, whichever is longer.

Question 6

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

Accepted Answer

Non-current liabilities are obligations that are not expected to be settled using current assets within the next year; they are typically paid over a longer period.

Question 7

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

Accepted Answer

The relationship between current assets and current liabilities is used to calculate the current ratio, which measures a company's ability to pay short-term obligations, thus assessing its liquidity.

Question 8

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

Accepted Answer

A worksheet helps organize and summarize financial data, making it easier to prepare interim financial statements by providing a clear overview of accounts and adjustments.

Question 9

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

Accepted Answer

The acid test ratio, also known as the quick ratio, measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.

Question 10

Unearned revenue is an example of a revenue.

Accepted Answer

Unearned revenue is a liability, not a revenue, because it represents money received for goods or services not yet delivered or performed.

Question 11

The work sheet is a type of:
A) financial statement.
B) permanent accounting record.
C) working paper.
D) journal.

Accepted Answer

A worksheet is a working paper used by accountants to prepare financial statements and is not a permanent accounting record.

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.

Accepted Answer

The correct sequence for the accounting cycle is to first analyze transactions, then journalize them, post to the ledger, adjust entries, prepare financial statements, and finally close the books.

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

Accepted Answer

The closing entry for the drawings account requires a debit to the capital account to reduce the owner's equity by the amount withdrawn during the period.

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.

Accepted Answer

The post-closing trial balance contains only balance sheet accounts because all income statement accounts are closed to retained earnings at the end of the accounting period.

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.

Accepted Answer

Working capital is calculated as current assets minus current liabilities. In this case, working capital is $1,500 - $1,000 = $500.

Question 16

Use this adjusted trial balance to answer the following question.

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

Accepted Answer

The answer of Use this adjusted trial balance to answer...

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.

Accepted Answer

The answer of Use this adjusted trial balance to answer...

Question 18

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

Accepted Answer

The answer of Define and give an example of a...

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

Accepted Answer

The answer of The following are the nine steps in...

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

Accepted Answer

The answer of Indicate whether the following items are current...

Quiz 4: Completion of the Accounting Cycle

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

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

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.

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.

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

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

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

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

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

Unearned revenue is an example of a revenue.

The work sheet is a type of:

The proper sequence for the accounting cycle is:

The closing entry for the drawings accounts will require:

The post-closing trial balance will:

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

Use this adjusted trial balance to answer the following question. -Prepare the December 31 closing entries for T. Ball Company.

Use this adjusted trial balance to answer the following question. -Calculate the current ratio and the acid-test ratio for T. Ball Company.

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

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

Quiz 4: Completion of the Accounting Cycle

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

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

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.

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.

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

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

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

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

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

Unearned revenue is an example of a revenue.

The work sheet is a type of:

The proper sequence for the accounting cycle is:

The closing entry for the drawings accounts will require:

The post-closing trial balance will:

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

Use this adjusted trial balance to answer the following question. -Prepare the December 31 closing entries for T. Ball Company.

Use this adjusted trial balance to answer the following question. -Calculate the current ratio and the acid-test ratio for T. Ball Company.

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

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

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