Question 1

The business failed to close any of the revenue accounts. The result of this error is that
A) revenues will be understated.
B) capital will be understated.
C) the assets will be overstated.
D) the liabilities will be overstated.

Accepted Answer

When revenue accounts are not closed, the income summary does not reflect the earned revenues, which in turn means that the amount transferred to the owner's capital account is less than it should be. This results in the capital being understated.

Question 2

The following normal account balances were found on the general ledger before closing entries were prepared: $$\begin{array} { l r l r } 
\text { Revenue } & \$ 700 & \text { Cash } & \$ 500 \
\text { Expenses } & \$ 400 & \text { Accounts Receivable } & \$ 350 \
\text { Capital } & \$ 7,500 & \text { Withdrawals } & \$ 1,000
\end{array}$$
After closing entries are posted, what is the balance in the Capital account?
A) $7,800
B) $7,500
C) $6,800
D) Closing entries do not affect the Capital account.

Accepted Answer

The answer of The following normal account balances were found...

Question 3

On Flex Company's worksheet the revenue account had a normal balance of $4,100. The entry to close the account would include a
A) debit to Income Summary for $4,100.
B) credit to Income Summary for $4,100.
C) debit to Flex, Capital for $4,100.
D) credit to Revenue for $4,100.

Accepted Answer

To close the revenue account with a normal balance of $4,100, the entry should include a credit to Income Summary for $4,100, which will transfer the revenue to the Income Summary account. The Income Summary account will then be closed to the retained earnings account. The other options do not accurately reflect the process of closing the revenue account.

Question 4

The balance in the J. Higgins, Withdrawals account was $4,700. The entry to close the account would include a
A) debit to Income Summary, $4,700.
B) credit to Income Summary, $4,700.
C) debit to J. Higgins, Capital, $4,700.
D) debit to J. Higgins, Withdrawals, $4,700.

Accepted Answer

DTo close the J. Higgins, Withdrawals account, you would debit J. Higgins, Capital for $4,700 to decrease the owner's equity (C) and credit J. Higgins, Withdrawals for $4,700 to bring its balance to zero (D). This transfers the withdrawal amount out of the temporary withdrawals account and into the permanent capital account, reflecting the reduction in owner's equity due to withdrawals.

Question 5

After closing the revenue, expense, and withdrawal accounts, the capital increased by $3,000. Which of the following situations could have occurred?
A) The company had a net income.
B) The owner invested an additional amount.
C) The owner made a withdrawal.
D) All of these answers are correct.

Accepted Answer

An increase in capital can result from a net income, additional owner investment, or both, despite withdrawals. Each option can contribute to an increase in capital.

Question 6

The following normal account balances were found on the general ledger before closing entries were prepared: $$\begin{array} { l r l r } 
\text { Revenue } & \$ 700 & \text { Cash } & \$ 500 \
\text { Expenses } & \$ 400 & \text { Accounts Receivable } & \$ 350 \
\text { Capital } & \$ 7,500 & \text { Withdrawals } & \$ 1,000
\end{array}$$
After closing entries are posted, what is the balance in the Revenue account?
A) $700
B) $0
C) $300
D) Closing entries do not affect Revenue.

Accepted Answer

Closing entries transfer the net income or loss to the retained earnings account and zero out the revenue and expense accounts. Therefore, the balance in the Revenue account after closing entries are posted is $0.

Question 7

The balance in the Rent Expense account on the worksheet was $725. The journal entry to close the Rent Expense account is
A) Rent Expense 725 Prepaid Rent 725
B) Rent Expense 725 Income Summary 725
C) Rent Expense 725 Capital 725
D) Income Summary 725 Rent Expense 725

Accepted Answer

The correct journal entry to close the Rent Expense account involves debiting the Income Summary account and crediting the Rent Expense account. This moves the expense out of the Rent Expense account and into the Income Summary account, which is used to compile all income and expenses for the period.

Question 8

The Rent Expense account had a normal balance of $2,725. The entry to close the account would include a
A) debit to Rent Expense, $2,725.
B) debit to Income Summary, $2,725.
C) debit to Capital, $2,725.
D) credit to Income Summary, $2,725.

Accepted Answer

The entry to close the Rent Expense account, which is an expense account with a debit balance, would include a debit to the Income Summary account and a credit to the Rent Expense account to bring its balance to zero. This transfers the expense's balance to the Income Summary account as part of the process to close the books.

Question 9

B. Benson's worksheet showed the revenue account, Rental Fees, $1,250. The journal entry to close the account is
A) Rental Fees 1,250 Income Summary 1,250
B) Benson, Capital 1,250 Rental Fees 1,250
C) Rental Fees 1,250 Benson, Capital 1,250
D) Income Summary 1,250 Rental Fees 1,250

Accepted Answer

The revenue account, Rental Fees, is closed by debiting the account for $1,250 and crediting the Income Summary account for $1,250. This entry transfers the balance of the Rental Fees account to the Income Summary account, which is then closed to the Benson, Capital account.

Question 10

The Income Summary account shows debits of $17,000 and credits of $12,000. This results in a
A) net income of $29,000.
B) net loss of $29,000.
C) net income of $5,000.
D) net loss of $5,000.

Accepted Answer

The Income Summary account is used to close temporary accounts such as revenue and expenses into retained earnings.

Since there are more debits than credits in the Income Summary account, this means that expenses exceeded revenue, resulting in a net loss.

To calculate the amount of the net loss, we need to subtract the total credits from the total debits:
$17,000 - $12,000 = $5,000

Therefore, the correct answer is D) net loss of $5,000.

Question 11

How do you close the expense accounts?
A) Debit Capital; credit the expense accounts
B) Credit Capital; debit the expense accounts
C) Credit Income Summary; debit the expense accounts
D) Debit Income Summary; credit the expense accounts

Accepted Answer

To close the expense accounts, we need to transfer their balances to the Income Summary account. This can be done by debiting the Income Summary account and crediting the individual expense accounts. Therefore, option D - Debit Income Summary; credit the expense accounts - is the correct choice. The other options are incorrect because they either do not involve the Income Summary account or result in incorrect account balances.

Question 12

The entry to close the expense account(s) was entered in reverse-Income Summary was credited and the expense account(s) was/were debited. The result of this error is that
A) before closing it, Income Summary will have a credit balance.
B) before closing it, Income Summary will have a debit balance.
C) the assets will be overstated.
D) the liabilities will be overstated.

Accepted Answer

By crediting the Income Summary and debiting the expense accounts, the expenses are essentially being added back to the company's income, resulting in a higher income summary balance before it is closed. This does not directly affect the reported assets or liabilities on the balance sheet.

Question 13

Closing entries will
A) increase the Owner's Capital.
B) decrease the Owner's Capital balance.
C) either increase or decrease Owner's Capital.
D) not affect the Owner's Capital balance.

Accepted Answer

Closing entries can either increase or decrease the Owner's Capital depending on whether the business has earned a net income or incurred a net loss during the accounting period.

Question 14

The entry to close the revenue account(s) was entered in reverse-Income Summary was debited and the revenue account(s) was/were credited. The result of this error is that
A) before closing it, Income Summary will have a credit balance.
B) before closing it, Income Summary will have a debit balance.
C) the assets will be overstated.
D) the liabilities will be overstated.

Accepted Answer

The error of debiting Income Summary and crediting the revenue account(s) is known as the reversal of entries. This error will result in Income Summary having a debit balance instead of a credit balance before closing. Therefore, the correct answer is option B. Options C and D are incorrect because the reversal of entries does not affect assets or liabilities. Option A is incorrect because Income Summary will have a debit balance, not a credit balance, before closing.

Question 15

The income statement credit column of the worksheet showed the following revenues: Maintenance Fees $800
Professional Fees 700
The journal entry to close the revenue accounts is
A) $$\begin{array}{l}
\text { Income Summary } \quad 1,500\
\begin{array} { l l } 
\text { Maintenance Fees } & 800 \
\text { Professional Fees } & 700
\end{array}
\end{array}$$
B) Maintenance Fees $\quad 800$
Professional Fees $\quad 700$
Income Summary$\quad 1,500$
C) Capital $\quad 1,500$
income summary $\quad 1,500$
D) $$\begin{array} { l l l } 
\text { Maintenance Fees } & 800 & \
\text { Professional Fees } & 700 & \
\quad \text { Capital } & & 1,500
\end{array}$$

Accepted Answer

The journal entry to close revenue accounts is to debit the revenue accounts (Maintenance Fees and Professional Fees) and credit the Income Summary account for the same amount. Therefore, the correct option is B, which shows the debits to Maintenance Fees and Professional Fees and a credit to Income Summary for $800 and $700, respectively, totaling $1,500.

Question 16

The following normal account balances were found on the general ledger before closing entries were prepared: $$\begin{array} { l r l r } 
\text { Revenue } & \$ 700 & \text { Cash } & \$ 500 \
\text { Expenses } & \$ 400 & \text { Accounts Receivable } & \$ 350 \
\text { Capital } & \$ 7,500 & \text { Withdrawals } & \$ 1,000
\end{array}$$
After closing entries are posted, what is the balance in the Cash account?
A) $800
B) $0
C) $300
D) Closing entries do not affect the Cash account.

Accepted Answer

Closing entries are used to transfer the balances of temporary accounts (revenues, expenses, and withdrawals) to the owner's capital account. They do not affect the balance of permanent accounts such as Cash.

Question 17

M. Smuts showed a net income of $5,250. The entry to close the Income Summary account would include a
A) debit to M. Smuts Capital, $5,250.
B) credit to M. Smuts Capital, $5,250.
C) debit to Income Summary, $5,250.
D) Both B and C are correct.

Accepted Answer

The correct entries to close the Income Summary account after showing a net income involve crediting M. Smuts Capital to increase the owner's equity by the net income amount ($5,250) and debiting the Income Summary account to zero it out, reflecting the transfer of net income to the owner's capital account.

Question 18

The Income Summary account shows debits of $18,500 and credits of $11,275. This results in a
A) net income of $29,775.
B) net loss of $29,775.
C) net income of $7,225.
D) net loss of $7,225.

Accepted Answer

The Income Summary account shows a net loss because the debits ($18,500) exceed the credits ($11,275) by $7,225.

Question 19

J. Oros showed a net loss of $3,250. The entry to close the Income Summary account would include a
A) debit to Oros, Capital, $3,250.
B) debit to Income Summary, $3,250.
C) credit to Oros, Capital, $3,250.
D) credit to Cash, $3,250.

Accepted Answer

When a business shows a net loss, the amount is debited to the owner's capital account to decrease the capital. This reflects the reduction in equity due to the loss.

Question 20

All permanent accounts can be found
A) on the Income Statement.
B) on the Statement of Owner's Equity.
C) on the Balance Sheet.
D) Permanent accounts do not appear on the financial statements.

Accepted Answer

Permanent accounts are accounts that are not closed at the end of the accounting period and their balances are carried forward to subsequent accounting periods. Examples of permanent accounts include assets, liabilities, and owner's equity accounts. Since the Balance Sheet reports a company's assets, liabilities, and owner's equity, all permanent accounts can be found on the Balance Sheet.

Quiz 5: The Accounting Cycle Completed: Closing and Post-Closing Trial Balance

The business failed to close any of the revenue accounts. The result of this error is that

On Flex Company's worksheet the revenue account had a normal balance of $4,100. The entry to close the account would include a

The balance in the J. Higgins, Withdrawals account was $4,700. The entry to close the account would include a

After closing the revenue, expense, and withdrawal accounts, the capital increased by $3,000. Which of the following situations could have occurred?

The balance in the Rent Expense account on the worksheet was $725. The journal entry to close the Rent Expense account is

The Rent Expense account had a normal balance of $2,725. The entry to close the account would include a

B. Benson's worksheet showed the revenue account, Rental Fees, $1,250. The journal entry to close the account is

The Income Summary account shows debits of $17,000 and credits of $12,000. This results in a

How do you close the expense accounts?

The entry to close the expense account(s) was entered in reverse-Income Summary was credited and the expense account(s) was/were debited. The result of this error is that

Closing entries will

The entry to close the revenue account(s) was entered in reverse-Income Summary was debited and the revenue account(s) was/were credited. The result of this error is that

The income statement credit column of the worksheet showed the following revenues: Maintenance Fees $800 Professional Fees 700 The journal entry to close the revenue accounts is

M. Smuts showed a net income of $5,250. The entry to close the Income Summary account would include a

The Income Summary account shows debits of $18,500 and credits of $11,275. This results in a

J. Oros showed a net loss of $3,250. The entry to close the Income Summary account would include a

All permanent accounts can be found