Question 1

If the beginning balance of Retained Earnings equals $10,000,net income for the year equals $6,000,and dividends for the year equal $2,000,then the ending balance of Retained Earnings equals $18,000.Ending Retained Earnings = beginning Retained Earnings ($10,000)+ net income ($6,000)- dividends ($2,000)= $14,000.

Accepted Answer

The correct calculation is: Beginning Retained Earnings ($10,000) + Net Income ($6,000) - Dividends ($2,000) = $14,000, not $18,000.

Question 2

The concept of matching in accounting refers to:

Accepted Answer

Matching refers to the principle of recording all costs associated with generating revenue in the same period in which revenue is recognized. This ensures that the expenses incurred in earning revenue are correctly matched with the revenue earned, giving a clear picture of the profitability of the business. Choice B refers to the principle of historical cost, while choice C refers to the concept of the entity, both of which are separate from the matching principle.

Question 3

Long-term liabilities are liabilities due in more than one year.

Accepted Answer

Long-term liabilities are defined as liabilities that are due in more than one year from the balance sheet date.

Question 4

The closing entry for revenue accounts includes a debit to Retained Earnings and a credit to all revenue accounts.The closing entry for revenue accounts includes a debit to all revenue accounts and a credit to Retained Earnings.

Accepted Answer

The closing entry for revenue accounts includes a debit to all revenue accounts and a credit to Retained Earnings, not the other way around.

Question 5

The closing entry for dividends includes a debit to the Dividends account and a credit to Retained Earnings.The closing entry for dividends includes a debit to Retained Earnings and a credit to the Dividends account.

Accepted Answer

The closing entry for dividends includes a debit to Retained Earnings and a credit to the Dividends account. This is because dividends are a distribution of earnings and decrease the amount of retained earnings.

Question 6

Which accounting principle states that a company should "record revenues when they provide goods and services to customers?"

Accepted Answer

The revenue recognition principle states that a company should record revenues when they provide goods and services to customers. This principle ensures that revenue is recorded accurately and in a timely manner.

Question 7

Long-term asset categories include investments;property,plant,and equipment;and intangible assets.

Accepted Answer

Long-term asset categories include investments (such as stocks and bonds), property, plant, and equipment (such as machinery and buildings), and intangible assets (such as patents and trademarks).

Question 8

Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5.According to the revenue recognition principle,in which month should Air France have recognized this revenue?

Accepted Answer

According to the revenue recognition principle, revenue should be recognized when the earning process is complete, which in this case is when the flight takes place. Therefore, Air France should recognize the revenue in April, the month of the flight.

Question 9

The closing entry for expense accounts includes a debit to Retained Earnings and a credit to all expense accounts.

Accepted Answer

This statement is true. The purpose of the closing entry for expense accounts is to transfer the balance of these accounts to Retained Earnings, which is a permanent account in the equity section of the balance sheet. This process resets the income statement accounts to zero for the next accounting period.

Question 10

After closing entries are posted to the accounts in the general ledger,all asset and liability accounts have a balance of zero.After closing entries are prepared,all revenue,expense,and dividend accounts have a balance of zero.

Accepted Answer

After closing entries are posted, all revenue, expense, and dividend accounts have a balance of zero to prepare for the next accounting period, but asset and liability accounts retain their balances to reflect the ongoing financial position of the business.

Question 11

If the beginning balance of Retained Earnings equals $12,000,the ending balance of Retained Earnings equals $15,000,and dividends for the year equal $1,000,then net income for the year equals $4,000.

Accepted Answer

The answer of If the beginning balance of Retained Earnings...

Question 12

The components of retained earnings include assets,expenses,and dividends.The components of retained earnings include revenues,expenses,and dividends.

Accepted Answer

The correct components of retained earnings include revenues, expenses, and dividends. Assets are not included in retained earnings.

Question 13

Which of the following concepts suggests that expenses should be recognized in the same period as the revenues they help to generate?

Accepted Answer

The concept of matching suggests that expenses should be recognized in the same period as the revenues they help to generate. This is necessary to accurately determine the profitability of the company in a specific period. The accounting equation involves the relationship between assets, liabilities, and equity, while revenue recognition deals with the timing of recognizing revenue in financial statements.

Question 14

Closing entries transfer the balances of all temporary accounts (revenues,expenses,and dividends)to the Common Stock account.Balances of temporary accounts are transferred to Retained Earnings.

Accepted Answer

Closing entries transfer the balances of all temporary accounts to Retained Earnings, not Common Stock account.

Question 15

After closing entries are prepared,the balance of Retained Earnings is updated to reflect the activity in the revenue,expense,and dividend accounts for the period.

Accepted Answer

This statement is true. The purpose of closing entries is to transfer the balances of the revenue, expense, and dividend accounts to Retained Earnings to update the balance for the period.

Question 16

The accounting basis that records revenues when goods or services are provided to customers and expenses with related revenues is referred to as:

Accepted Answer

The accrual basis of accounting records revenues when they are earned, even if the cash has not been received, and records expenses when they are incurred, even if the cash has not been paid. This basis of accounting is required by generally accepted accounting principles (GAAP) in order to provide a more accurate picture of a company's financial performance and position. The cash basis records revenues and expenses based on when cash is received or paid, and the matching basis attempts to match expenses with the revenues they generate, but is not as precise as the accrual basis.

Question 17

The accounting basis that helps to measure and report revenues and expenses in a way that clearly reflects the ability of a company to generate value for its owners is referred to as:

Accepted Answer

The accrual-basis accounting method is best suited to measure and report revenues and expenses in a way that reflects the ability of a company to generate value for its owners. This method recognizes revenue when it is earned, not just when it is received, and recognizes expenses when they are incurred, not just when they are paid. This helps to provide a more accurate picture of a company's financial performance and helps investors and stakeholders make informed decisions.

Question 18

The revenue recognition principle states that:

Accepted Answer

The revenue recognition principle states that revenue should be recognized when goods or services are provided to the customer, regardless of when payment is received. This principle is important for accurate financial reporting and matching revenues with related expenses. Option A is incorrect because revenue may be recognized before or after cash is received. Option C is incorrect because revenue is recognized in the income statement, not the balance sheet.

Question 19

The post-closing trial balance is a list of all accounts and their balances at a particular date after the account balances have been updated for closing entries.

Accepted Answer

This statement is true. The post-closing trial balance is prepared after the closing entries have been made and all temporary accounts have been closed to the retained earnings account. It shows the balances of all permanent accounts at the end of the accounting period.

Question 20

The post-closing trial balance does not include any assets or liabilities,because these accounts all have zero balances after closing entries.The post-closing trial balance does not include any revenues,expenses,or dividends,because these accounts all have zero balances after closing entries.

Accepted Answer

The post-closing trial balance does include assets and liabilities because these accounts are not closed out and therefore do not have zero balances after closing entries. It does not include revenues, expenses, or dividends because these accounts are closed to Retained Earnings and do have zero balances after closing entries.

Quiz 3: The Accounting Cycle: End of the Period