Question 1

Accounting entries made to reduce the temporary accounts to zero balances are known as:

Accepted Answer

Closing entries are made at the end of an accounting period to reduce the temporary accounts (revenue, expense, and dividend accounts) to zero balances and transfer their balances to the permanent capital account. This process prepares the accounts for the next accounting period. The other options (correcting entries, adjusting entries, reversing entries) do not specifically relate to the closing process.

Question 2

Because the balance at the end of one accounting period becomes the opening balance at the start of the next period,balance sheet accounts are known as:

Accepted Answer

Balance sheet accounts are permanent accounts because their balances carry forward from one accounting period to the next. Temporary accounts, in contrast, are used to collect revenue and expense information for a specific accounting period and are closed out at the end of that period. Long-term accounts and multi-period accounts are not commonly used accounting terms.

Question 3

In the closing process which accounts are closed?

Accepted Answer

In the closing process, only the income and expense accounts are closed. This is done to transfer the balances of these accounts to the retained earnings account, which is a component of the equity accounts. The asset, liability, and equity accounts are not closed as they carry forward to the next accounting period. Additionally, only the accounts that have been used for adjusting entries will be closed.

Question 4

Which of these is not a temporary account?

Accepted Answer

Sales revenue, drawings, and cleaning expense are all temporary accounts because they track transactions that occur during a specific accounting period and are closed out at the end of that period. Bank, on the other hand, is a permanent account because it tracks a company's ongoing financial position and is not closed out at the end of each period.

Question 5

Which of these is not a permanent account?

Accepted Answer

Prepaid rent, accounts receivable, and owner's capital account are all permanent accounts because they carry over from one accounting period to another. Rent expense is a temporary account because it represents expenses incurred during a specific accounting period and is closed at the end of that period.

Question 6

King Ltd's year-end trial balance includes the following accounts.
-Cash
-Sales revenue
-Accounts payable
-Equity
-Interest expense
-Interest receivable
-Motor vehicles
How many of these are temporary accounts?

Accepted Answer

Sales revenue, interest expense, and interest receivable are temporary accounts that are closed at the end of each accounting period to the retained earnings account. Cash, accounts payable, equity, and motor vehicles are permanent accounts that are not closed and carry over into the next accounting period. Therefore, three out of the seven accounts listed are temporary accounts.

Question 7

Because income and expenses are accumulated for only one year they are known as:

Accepted Answer

Income and expenses are temporary accounts because their balances are transferred to the permanent accounts (such as equity, asset, and liability accounts) at the end of the accounting period. This process is called closing entries, and it resets the temporary accounts to zero in preparation for the next accounting period.

Question 8

Accounting entries made at the end of an accounting year to reduce expense and income accounts to zero are called:

Accepted Answer

Closing entries are made at the end of an accounting year to transfer the balances from all temporary accounts (expense and income accounts) to the retained earnings account, thus reducing them to zero. This helps in starting fresh with the new accounting year.

Question 9

Income and expense accounts can be referred to as:

Accepted Answer

Income and expense accounts are considered temporary accounts because their balances are only relevant for a specific accounting period and are then transferred to the permanent accounts (such as asset, liability, and equity accounts) at the end of that period.

Question 10

Adjusting entries prepared for interim financial statements are:

Accepted Answer

Adjusting entries for interim financial statements are often recorded on a worksheet instead of directly in the journal or ledger to ensure accuracy and efficiency in creating the statements. It allows the adjustments to be made without affecting the actual accounting records until the end of the accounting period.

Question 11

What is the correct order for the steps in the closing process?
I Transfer the profit or loss to the owner's capital account
II Balance the owner's capital account
III Close the drawings account to the owner's capital account
IV Close the income and expense accounts to the profit or loss summary account

Accepted Answer

The correct order for the closing process in accounting is to first close the income and expense accounts to the profit or loss summary account (IV), then close the drawings account to the owner's capital account (III), transfer the profit or loss to the owner's capital account (I), and finally balance the owner's capital account (II).

Question 12

In the closing process which accounts are closed?

Accepted Answer

Only income and expense accounts are closed in the closing process. Asset, liability, and equity accounts carry forward to the next accounting period. All ledger accounts may be closed at the end of the year, but only income and expense accounts are closed during the closing process. All accounts that have been adjusted may or may not be closed depending on whether they are income or expense accounts.

Question 13

In which order do these steps in the accounting cycle occur?
I Prepare financial statements
Ii Prepare reversing entries
Iii Prepare adjusting entries
Iv Prepare closing entries
V Prepare an adjusted trial balance

Accepted Answer

The correct order is: Prepare adjusting entries (iii), Prepare an adjusted trial balance (v), Prepare financial statements (i), Prepare closing entries (iv), and finally Prepare reversing entries (ii). This sequence follows the logical flow of the accounting cycle, starting from adjusting entries to account for accruals and deferrals, to preparing the adjusted trial balance, then the financial statements, followed by closing entries to close temporary accounts, and finally, if necessary, preparing reversing entries at the start of the new period.

Question 14

Interim statements are:

Accepted Answer

Interim statements are prepared between annual reports and are usually half-yearly, quarterly or monthly.

Question 15

Closing an account means:

Accepted Answer

Closing an account means reducing the balance to zero to signify that there are no more transactions to be recorded in that account for a particular accounting period. This is typically done at the end of a fiscal year. Transferring the balance to the trial balance or balance sheet is not necessarily part of the closing process, and removing the account from the ledger would not be appropriate as the account may still be needed for future periods.

Question 16

Which of these is the correct treatment on the worksheet of the nominated item?

Accepted Answer

For profit earned, we debit the income statement (as it is revenue) and credit the balance sheet (as it increases owner's equity). The other options have inaccuracies: A is incorrect because for GST collection, we would credit the balance sheet (as it is a liability) and debit the income statement (as it is an expense); B is incorrect because for depreciation, we would debit the income statement (as it is an expense) and credit the balance sheet (as it reduces the value of the fixed assets); and D is incorrect because for cash at bank, we would debit the balance sheet (as it is an asset) and credit the adjustments (as it is an increase in assets).

Question 17

Which of the following statements about closing entries is true?

Accepted Answer

The answer of Which of the following statements about closing...

Question 18

Closing the accounts refers to:

Accepted Answer

Closing the accounts refers to transferring income and expense account balances to the profit or loss summary account, which is then closed to the equity account, which is done to prepare for the next accounting period. This process ensures that the current period's income and expenses are properly accounted for and that the equity account reflects the company's current financial position. Therefore, choice D is the best answer.

Question 19

In which order do these steps in the accounting cycle occur?
I Prepare closing entries
II Post to the ledger
III Enter business transactions in the journal
IV Prepare adjusting entries
V Prepare financial statements

Accepted Answer

The correct order is: Enter business transactions in the journal (III), Post to the ledger (II), Prepare adjusting entries (IV), Prepare financial statements (V), and finally Prepare closing entries (I). This sequence follows the logical flow of accounting processes from recording transactions to closing the books.

Question 20

Before calculating the profit for the period,the totals of the income statement debit and credit columns on the worksheet are $60 000 and $80 000 respectively.What is the amount of the profit or loss?

Accepted Answer

To find the profit or loss, we need to subtract the total expenses from the total revenue. The total revenue is the credit column of the income statement, which is $80,000. The total expenses are not given, so we cannot find the exact profit amount. However, since the total revenue is greater than the total expenses (debit column), we can conclude that there is a profit. Therefore, the only answer choice that represents a profit is D, $20,000 profit.

Quiz 5: Completing the Accounting Cycle Closing and Reversing Entries

Accounting entries made to reduce the temporary accounts to zero balances are known as:

Because the balance at the end of one accounting period becomes the opening balance at the start of the next period,balance sheet accounts are known as:

In the closing process which accounts are closed?

Which of these is not a temporary account?

Which of these is not a permanent account?

King Ltd's year-end trial balance includes the following accounts. -Cash -Sales revenue -Accounts payable -Equity -Interest expense -Interest receivable -Motor vehicles How many of these are temporary accounts?

Because income and expenses are accumulated for only one year they are known as:

Accounting entries made at the end of an accounting year to reduce expense and income accounts to zero are called:

Income and expense accounts can be referred to as:

Adjusting entries prepared for interim financial statements are:

In the closing process which accounts are closed?

In which order do these steps in the accounting cycle occur? I Prepare financial statements Ii Prepare reversing entries Iii Prepare adjusting entries Iv Prepare closing entries V Prepare an adjusted trial balance

Interim statements are:

Closing an account means:

Which of these is the correct treatment on the worksheet of the nominated item?

Which of the following statements about closing entries is true?

Closing the accounts refers to:

In which order do these steps in the accounting cycle occur? I Prepare closing entries II Post to the ledger III Enter business transactions in the journal IV Prepare adjusting entries V Prepare financial statements

Before calculating the profit for the period,the totals of the income statement debit and credit columns on the worksheet are $60 000 and $80 000 respectively.What is the amount of the profit or loss?