Deck 5: Closing Entries and the Post-Closing Trial Balance

Question 1

Which of the following accounts should be closed to Income Summary at the end of the fiscal year?

A) Rent Expense
B) Equipment
C) Wages Payable
D) Accumulated Depreciation
E) The owner's Drawing account

Answer 1

A

Question 2

The Income Summary account has a debit balance of $10,000 prior to closing. The owner's Drawing account has a balance of $7,000 before closing. The owner's Capital account will

A) decrease $10,000.
B) increase $17,000.
C) increase $10,000.
D) decrease $17,000.
E) increase $7,000.

Answer 2

D

Question 3

In the current year, Taylor Company incurred a net loss of $70,000. The owner of the company regularly invested $7,000 per month in the business. The owner's capital account will show a net:

A) increase of $7,000.
B) increase of $14,000.
C) decrease of $63,000.
D) increase of $77,000.
E) decrease of $7,000.

Answer 3

B

Question 4

The most efficient sources for closing entry information are the

A) general ledger and general journal.
B) general journal and work sheet.
C) general ledger and work sheet.
D) work sheet and financial statements.
E) balance sheet and income statement.

Question 5

If expenses are greater than revenue, the Income Summary account will be closed by a debit to

A) Cash and a credit to Income Summary.
B) Income Summary and a credit to Cash.
C) Capital and a credit to Income Summary.
D) Income Summary and a credit to Capital.
E) Income Summary and a credit to Drawing.

Question 6

If L. Green's total revenue for the year was $38,000 and total expenses were $30,000, the third closing entry would be

A) debit Income Summary; credit L. Green, Capital.
B) debit L. Green, Capital; credit Income Summary.
C) debit Income Summary; credit Income from Services.
D) debit Income from Services; credit Income Summary.
E) debit L. Green, Capital; credit L. Green, Drawing.

Question 7

Which of the following accounts should be closed to J. Bean, Capital, in the fourth closing entry?

A) Professional Fees
B) J. Bean, Drawing
C) Wages Expense
D) Income Summary
E) Accumulated Depreciation

Question 8

The owner's Drawing account for the current period is closed to the

A) Cash account.
B) Income Summary account.
C) Income from Services account.
D) Wages Expense account.
E) owner's Capital account

Question 9

Which of the following accounts would not be involved in closing entries?

A) Advertising Expense
B) J. Ryan, Drawing
C) Salaries Payable
D) Income from Services
E) Rent Expense

Question 10

The post-closing trial balance will include

A) Accumulated Depreciation.
B) Depreciation Expense.
C) Drawing.
D) Rent Expense.
E) Income from Services.

Question 11

The Income Summary account has an $8,000 credit balance prior to being closed to the owner's Capital account. The owner's Capital account had a $32,000 beginning balance and a $36,500 ending balance. Determine the amount of the owner's drawing during the current period.

A) $8,500
B) $3,500
C) $2,500
D) $4,500
E) $8,000

Question 12

Which of the following are all temporary accounts?

A) Liabilities, revenue, and expenses
B) Revenue, liabilities, and the owner's Drawing
C) Assets, liabilities, and owner's Drawing
D) Revenue, expenses, and the Owner's Drawing
E) Liabilities and assets

Question 13

Closing entries are prepared

A) before adjusting entries.
B) during the month.
C) on the first day of the new accounting period.
D) after adjusting entries.
E) at the option of the company's accounting department.

Question 14

Which of the following can be prepared by taking the account balances from the general ledger after closing?

A) Income statement
B) Post-closing trial balance
C) Balance sheet
D) Statement of owner's equity
E) Adjusted trial balance

Question 15

Which of the following sequences of documents or records describes the proper sequence in the accounting cycle?

A) Source documents, journal, ledger, work sheet, financial statements
B) Source documents, work sheet, journal, ledger, financial statements
C) Source documents, ledger, journal, work sheet, financial statements
D) Work sheet, source documents, financial statements, ledger, journal
E) Financial statements, journal, ledger, source documents, work sheet

Question 16

The last step in the closing procedure closes

A) the Income Summary account.
B) the Capital account.
C) the Drawing account.
D) the expense accounts.
E) all liability accounts.

Question 17

In preparing the first two closing entries, to which of the following columns of the work sheet does one refer?

A) Balance Sheet columns
B) Adjusted Trial Balance columns
C) Income Statement columns
D) Trial Balance columns
E) Adjustments columns

Question 18

The post-closing trial balance is best prepared from the

A) general ledger.
B) general journal and the general ledger.
C) general ledger and the financial statements.
D) financial statements.
E) income statement.

Question 19

The salaries payable account is:

A) closed into the capital account.
B) closed into the drawing account.
C) shown on the balance sheet as a liability.
D) shown on the income statement.
E) shown on the balance sheet as an asset.

Question 20

Closing entries are prepared to close the

A) temporary accounts.
B) accumulated depreciation accounts.
C) owner's Capital account.
D) Wages Payable account.
E) payables and receivables.

Question 21

Which of the following accounts would be closed into Income Summary in the procedure of closing accounts at the end of a fiscal period?

A) Rent Payable
B) Cash
C) Insurance Expense
D) Accumulated Depreciation

Question 22

The Income Summary account would be reported on which financial statement?

A) Income Statement
B) Balance Sheet
C) Statement of Owner's Equity
D) None. The Income Summary account is not reported on a financial statement.

Question 23

Financial statements prepared during the fiscal year for periods of less than twelve months are called

A) temporary statements.
B) internal statements.
C) interim statements.
D) nominal statements.
E) external statements.

Question 24

Revenue and expenses would not appear on a(n)

A) unadjusted trial balance.
B) adjusted trial balance.
C) income statement.
D) work sheet.
E) post-closing trial balance.

Question 25

The adjusted balances for Tomas Co. are listed below.
Cash, $20,000
Accounts Receivable, $2,500
Prepaid Insurance, $3,500
Equipment, $15,000
Accumulated Depreciation, $2,000
Accounts Payable, $4,000
J. Tomas, Capital, $30,000
J. Tomas, Drawing, $10,000
Income from Services, $35,000
Wages Expense, $12,000
Rent Expense, $8,000
The entry to close Income Summary would involve a

A) credit to Net Income, $15,000.
B) debit to Income Summary, $15,000.
C) debit to Net Income, $15,000.
D) debit to J. Tomas, Capital, $15,000

Question 26

Which of the following steps follows the recording of a business transaction in a journal?

A) Posting of journal entries to the accounts in a ledger
B) Preparing a post-closing trial balance
C) Completing the work sheet
D) Journalizing and posting adjusting entries

Question 27

Assume a company has a net income that exceeds the owner's drawing for the current year. The owner's Capital account

A) will have a zero balance after the closing entries are completed.
B) will increase.
C) will decrease.
D) will remain the same as the beginning balance.
E) It is impossible to tell with the information provided.

Question 28

Which of the following statements is true concerning the steps in the accounting cycle?

A) Preparing a trial balance should be completed before recording business transactions into a journal.
B) Journalizing and posting the closing entries should be completed after preparing financial statements.
C) Completing the work sheet should be completed after preparing the financial statements.
D) Preparing a post-closing trial balance should be completed before completing the work sheet.

Question 29

Which of the following is true of the effect of net loss on financial statements?

A) It decreases the cash account balance.
B) It increases expenses.
C) It decreases the owner's capital account balance.
D) It decreases accounts payable.
E) It increases the owner's drawing account balance.

Question 30

The adjusted balances for Tomas Co. are listed below.
Cash, $20,000
Accounts Receivable, $2,500
Prepaid Insurance, $3,500
Equipment, $15,000
Accumulated Depreciation, $2,000
Accounts Payable, $4,000
J.Tomas, Capital, $30,000
J.Tomas, Drawing, $10,000
Income from Services, $35,000
Wages Expense, $12,000
Rent Expense, $8,000
The entry to close revenue would involve a

A) debit to Income Summary, $35,000.
B) credit to Income from Services, $35,000
C) debit to Income from Services, $35,000.
D) None of the answers listed

Question 31

Which of the following account(s) would remain open after closing entries?

A) Accounts Payable
B) Equipment
C) Owner's capital
D) All of the answers listed

Question 32

The adjusted balances for Tomas Co. are listed below.
Cash, $20,000
Accounts Receivable, $2,500
Prepaid Insurance, $3,500
Equipment, $15,000
Accumulated Depreciation, $2,000
Accounts Payable, $4,000
J. Tomas, Capital, $30,000
J. Tomas, Drawing, $10,000
Income from Services, $35,000
Wages Expense, $12,000
Rent Expense, $8,000
The entry to close the drawing account would involve a

A) credit to J. Tomas, Drawing, $10,000.
B) debit to Income Summary, $10,000.
C) credit to J. Tomas, Capital, $10,000.
D) debit to Income from Services, $10,000.

Question 33

Which of the following accounts in the ledger will ordinarily appear in the post-closing trial balance?

A) Drawing
B) Accounts Receivable
C) Income from Services
D) Supplies Expense
E) Wages Expense

Question 34

Entries required to clear or zero the balances of temporary accounts at the end of the year are called ____________ entries.

A) adjusting
B) journal
C) closing
D) clearing

Question 35

The adjusted balances for Tomas Co. are listed below.
Cash, $20,000
Accounts Receivable, $2,500
Prepaid Insurance, $3,500
Equipment, $15,000
Accumulated Depreciation, $2,000
Accounts Payable, $4,000
J. Tomas, Capital, $30,000
J. Tomas, Drawing, $10,000
Income from Services, $35,000
Wages Expense, $12,000
Rent Expense, $8,000
The entry to close expenses would involve a

A) debit to Income Summary, $20,000
B) credit to Income Summary, $20,000
C) debit to Income Summary, $12,000.
D) debit to Wages Expense, $12,000, and Rent Expense, $8,000.

Question 36

The last step in the accounting cycle is to

A) prepare a trial balance.
B) prepare a post-closing trial balance.
C) complete the work sheet.
D) journalize and post the adjusting entries.

Question 37

Which of the following accounts will have a remaining balance after the closing process is completed?

A) Income from Services
B) Rent Expense
C) Owner's Drawing
D) Owner's Capital
E) Depreciation Expense

Question 38

The adjusted balances for Windsor Co. are listed below. ​
Cash, $10,000
Accounts Receivable, $1,250
Prepaid Insurance, $1,750
Equipment, $7,500
Accumulated Depreciation, $1,000
Accounts Payable, $2,000
T) Windsor, Capital, $15,000
J) Windsor, Drawing, $5,000
Income from Services, $17,500
Wages Expense, $6,000
Rent Expense, $4,000
​
After recording the closing entries, what would be the balance of the capital account?

A) $35,000
B) $12,500
C) $17,500
D) $10,000

Question 39

The entry to close the drawing account would involve a

A) debit to capital.
B) credit to cash.
C) debit to Income Summary.
D) credit to net income.

Question 40

The entry to close revenue would involve a

A) debit to capital.
B) credit to Income Summary.
C) debit to net income.
D) credit to revenue.

Question 41

The second step in the closing process is to close the _____________ account(s) into the ___________ account(s).

A) expense, income summary
B) income summary, expense
C) expense, net income
D) revenue, income summary

Question 42

Which of the following is the last step in the procedure of closing accounts at the end of a fiscal period?

A) Close the expense account(s) into Income Summary.
B) Close the drawing account into the capital account.
C) Close the revenue account(s) into Income Summary.
D) Close the income summary account into the capital account.

Question 43

The first step in the closing process is to close the _____________ account(s) into the ___________ account(s).

A) revenue, net income
B) income summary, revenue
C) expense, net income
D) revenue, income summary

Question 44

When using the work sheet to prepare closing entries, which of the following statement is correct?

A) You should use all balances listed in the balance sheet columns.
B) You should use all balances listed in the balance sheet columns and the income statement columns.
C) You should use all balances listed in the income statement columns.
D) None of the answers listed

Question 45

Which of the following account(s) are real accounts?

A) Cash
B) Accumulated Depreciation
C) Notes Payable
D) Capital
E) All of the accounts listed are real.

Question 46

Baker Co. uses the accrual basis of accounting. Baker Co. prepays cash in May for insurance that covers only the month of June. Which of the following statements is true?

A) Baker Co. should record the insurance expense in May.
B) Baker Co. should record the insurance expense in June.
C) Baker Co. should record the payment of cash in June.
D) Baker Co. should neither record the payment of cash nor the insurance expense in May.

Question 47

The fourth step in the closing process is to close the _____________ account(s) into the ___________ account(s).

A) Income Summary, Capital
B) Capital, Drawing
C) Drawing, Capital
D) Drawing, Income Summary

Question 48

___________ are prepared during the fiscal year and cover a period of time less than twelve months.

A) Fiscal statements
B) Annual statements
C) Interim statements
D) Closing statements

Question 49

The closing process causes the account balance of which account to be zeroed out?

A) Cash
B) Account Payable
C) Accumulated Depreciation
D) R. Carson, Drawing

Question 50

Cox Co. uses the cash basis of accounting. Cox Co. receives cash from customers in September for services to be performed in November. Which of the following is true?

A) Cox Co. should record revenue in September and receipt of cash in November.
B) Cox Co. should record revenue in November and receipt of cash in September.
C) Cox Co. should record both the receipt of cash and revenue in November.
D) Cox Co. should record both the receipt of cash and revenue in September.

Question 51

Which of the following are all permanent accounts?

A) Cash, Rent Expense, owner's drawing
B) Accumulated Depreciation, Notes Payable, owner's drawing
C) Cash, Prepaid Insurance, Notes Payable
D) Owner's capital, owner's drawing, Rent Expense

Question 52

Which of the following accounts would be shown on the post-closing trial balance?

A) Supplies Expense
B) Wages Payable
C) Depreciation, Equipment
D) Income from Services

Question 53

Munoz Co. prepays cash in October for insurance that covers only the month of November. Munoz Co. records the expense in October. Which method of accounting is Munoz Co. using?

A) accrual basis of accounting
B) cash basis of accounting
C) hybrid basis of accounting
D) consolidated basis of accounting

Question 54

Which of the following accounts would be shown on the post-closing trial balance?

A) owner's drawing
B) Rent Expense
C) Accumulated Depreciation
D) All of the accounts listed would be shown.

Question 55

The entry to close Income Summary, assuming a net loss, would involve a

A) credit to cash.
B) debit to net income.
C) credit to Income Summary.
D) credit to capital.

Question 56

The _______________ requires that revenue is recorded when earned and expenses are recorded when incurred.

A) accrual basis of accounting
B) cash basis of accounting
C) hybrid basis of accounting
D) GAAP basis of accounting

Question 57

The _______________ requires that revenue is recorded when it is received in cash and expenses are recorded when they are paid in cash.

A) accrual basis of accounting
B) cash basis of accounting
C) hybrid basis of accounting
D) GAAP basis of accounting

Question 58

In the closing procedure, the expense account(s) should be closed into the:

A) Income Summary account.
B) Net Income account.
C) Expense Payable account.
D) Drawings Account.

Question 59

Yellow Co. makes a sale to a customer in January but does not receive payment until March. Yellow Co. records the sale in January. Which method of accounting is Yellow Co. using?

A) accrual basis of accounting
B) cash basis of accounting
C) hybrid basis of accounting
D) consolidated basis of accounting

Question 60

The entry to close expenses would involve (a)

A) debit to Income Summary
B) debit to drawing.
C) credit to net income.
D) debits to expense accounts.

Question 61

If the totals of the post-closing trial balance are not equal, the first step in tracking down the error is to verify postings to the ledger.

Question 62

If a business has a net loss for a fiscal period, the journal entry to close the Income Summary account is a debit to Income Summary and a credit to Capital.

Question 63

Closing entries may be prepared from the ledger or the work sheet.

Question 64

The fourth step in the closing procedure is to close the Income Summary account into the Capital account.

Question 65

Both income statement and balance sheet accounts are closed at the end of a fiscal period.

Question 66

The balance of the Drawing account is closed to the Capital account.

Question 67

After the temporary accounts are closed, only the real accounts have balances.

Question 68

Information for the closing entries is normally obtained from the Adjusted Trial Balance columns of a work sheet.

Question 69

Entries required to clear or zero the balances of the temporary accounts at the end of the year are called adjusting entries.

Question 70

The first step in the closing entries is to close the revenue account(s) into the Income Summary account.

Question 71

The post-closing trial balance contains only asset, liability, and revenue accounts.

Question 72

The debit to Income Summary in the second closing entry represents the total expenses.

Question 73

Closing entries are posted to the work sheet, but not to the general ledger.

Question 74

A post-closing trial balance will include only permanent accounts.

Question 75

After closing the expense accounts, the total of the expense accounts will appear on the debit side of the Income Summary account.

Question 76

The owner's Capital account will always have a zero balance after the closing entries are posted.

Question 77

If Income Summary has a credit balance after closing revenue and expense accounts, this indicates a net loss.

Question 78

The balance in the owner's Capital account is closed to the owner's Drawing account.

Question 79

The purpose of the post-closing trial balance is to make sure the debit balances equal the credit balances before the closing process.

Question 80

The Income Summary account balance should always increase after the closing entries are posted at the end of the accounting period.