Question 1

List the steps of the accounting cycle that take place at the end of the period.

Accepted Answer

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Question 2

Closing entries are journalized and posted ________.
A) throughout the accounting period
B) before posting the adjusting entries
C) after preparing the post-closing trial balance
D) after preparing the financial statements

Accepted Answer

Closing entries are made after the financial statements have been prepared to clear out balances in temporary accounts and transfer their balances to permanent accounts for the next accounting period.

Question 3

Why are temporary accounts not included in the post-closing trial balance?

Accepted Answer

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Question 4

Adjusting journal entries are prepared ________.
A) after preparing the adjusted trial balance
B) after preparing the unadjusted trial balance
C) after posting the closing entries
D) after preparing the financial statements

Accepted Answer

Adjusting journal entries are prepared after preparing the unadjusted trial balance and before the adjusted trial balance. This is to ensure that the financial statements reflect the correct amounts for revenues, expenses, assets, and liabilities.

Question 5

A current ratio that has increased from the prior period indicates an improvement in the company's ability to pay its current debts.

Accepted Answer

An increase in the current ratio, which is calculated by dividing current assets by current liabilities, means that a company has more current assets available to pay off its current liabilities. This is an improvement in the company's ability to meet its short-term obligations.

Question 6

In an accounting cycle, which of the following steps takes place only at the end of the accounting period?
A) start with the beginning account balances
B) journalize transactions that occur
C) analyze transactions as they occur
D) journalize adjusting entries

Accepted Answer

Journalizing adjusting entries takes place only at the end of the accounting period to ensure that the accounts reflect the correct balances for financial reporting purposes. The other steps (starting with beginning account balances, journalizing transactions as they occur, analyzing transactions as they occur) take place throughout the accounting period.

Question 7

Which of the following steps must be completed before preparing the adjusted trial balance?
A) Prepare the post-closing trial balance.
B) Post journal entries to the accounts.
C) Journalize and post the closing entries.
D) Prepare the financial statements.

Accepted Answer

Before preparing the adjusted trial balance, it is necessary to post journal entries to the accounts. This step involves updating the ledger accounts with the transactions that have occurred, which is essential for reflecting the current account balances before making any adjustments.

Question 8

The ten steps of the accounting cycle are presented below. Identify the correct order of the steps by placing the numbers 1 (first step) to 10 (last step) by each description.
______ Start with beginning account balances.

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Question 9

In an accounting cycle, an analysis of transactions is performed at the end of each accounting period.

Accepted Answer

In an accounting cycle, an analysis of transactions is performed as they occur.

Question 10

List the steps of the accounting cycle that take place during the period.

Accepted Answer

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Question 11

The operating cycle is the process by which companies produce their financial statements for a specific period.

Accepted Answer

The operating cycle refers to the time it takes a company to turn inventory into cash, and then use that cash to pay for operating expenses, which is not the process of producing financial statements. Financial statements are usually produced after the end of a specific period, such as a quarter or a year, based on accounting records and transactions during that period.

Question 12

To make sure that an error was not made in the closing process, compare the Adjusted Trial Balance to the Post-Closing Trial Balance. List the three items that need to be considered in order to complete the step.

Accepted Answer

The answer of To make sure that an error was...

Question 13

The current ratio is calculated using the values from the income statement.

Accepted Answer

The current ratio is calculated using values from the balance sheet, specifically by dividing current assets by current liabilities.

Question 14

Which of the following statements is true of the accounting cycle?
A) It takes place only at the end of an accounting period.
B) It involves preparation of adjusting entries after the closing entries.
C) It ignores the beginning balances of accounts.
D) It is a process by which financial statements for a period are produced.

Accepted Answer

The accounting cycle is a process by which financial statements for a period are produced. It involves a series of steps that include recording journal entries, posting to ledgers, preparing trial balances, making adjusting entries, preparing financial statements, and closing temporary accounts. It occurs throughout the accounting period, not just at the end. The beginning balances of accounts are essential for proper and accurate financial reporting, and adjusting entries are made before closing entries. Therefore, options A, B, and C are incorrect.

Question 15

The smaller the current ratio, the higher the firm's ability to repay its current debts.

Accepted Answer

The opposite is true. The higher the current ratio, the higher the firm's ability to repay its current debts. A smaller current ratio indicates that the firm may have difficulty paying off its current debts.

Question 16

The process by which companies produce their financial statements for a specific period is called the ________.
A) operating cycle
B) closing process
C) opening process
D) accounting cycle

Accepted Answer

The accounting cycle refers to the process by which companies produce their financial statements for a specific period. This process includes identifying and analyzing transactions, recording them in the general ledger, adjusting entries, preparing financial statements, and closing the books for the period. Therefore, option D is the most appropriate answer.

Question 17

At the end of the period, the accounting cycle includes adjusting the accounts, preparing financial statements, and closing the accounts.

Accepted Answer

This is a correct statement about the accounting cycle. The adjusting process involves making necessary adjustments to the accounts for accrued and deferred items, such as interest expense or prepaid rent. The financial statements are then prepared to summarize the company's financial activity over the period, including the income statement, balance sheet, and statement of cash flows. Finally, the accounts are closed to reset the balances and prepare them for the next period.

Question 18

The current ratio shows the profitability of a firm.

Accepted Answer

The current ratio measures a firm's ability to pay its short-term obligations, not its profitability.

Question 19

The steps of the accounting cycle are followed throughout the accounting period.

Accepted Answer

The accounting cycle is a continuous process that is followed throughout the accounting period to record, analyze, and report financial transactions of a business. It includes steps such as journalizing, posting, preparing trial balance, adjusting entries, creating financial statements, and closing entries, and these steps are repeated every accounting period.

Question 20

Preparing the worksheet is a required step of the accounting cycle.

Accepted Answer

Preparing the worksheet is an optional step of the accounting cycle.

Quiz 4: Completing the Accounting Cycle

List the steps of the accounting cycle that take place at the end of the period.

Closing entries are journalized and posted ________.

Why are temporary accounts not included in the post-closing trial balance?

Adjusting journal entries are prepared ________.

A current ratio that has increased from the prior period indicates an improvement in the company's ability to pay its current debts.

In an accounting cycle, which of the following steps takes place only at the end of the accounting period?

Which of the following steps must be completed before preparing the adjusted trial balance?

The ten steps of the accounting cycle are presented below. Identify the correct order of the steps by placing the numbers 1 (first step) to 10 (last step) by each description. ______ Start with beginning account balances.