Question 1

Journal entries recorded at the end of each accounting period to prepare the revenue,expense, and withdrawals accounts for the upcoming year and to update the owner's capital account for the events of the year just finished are:

Accepted Answer

Closing entries are recorded at the end of an accounting period to close out the temporary revenue, expense, and withdrawals accounts and transfer their balances to the owner's capital account. This process updates the owner's capital account for the events of the year just finished and prepares the accounts for the upcoming year. Adjusting entries are recorded during the accounting period to ensure that the accounts are accurate and up-to-date, while work sheet entries are used to prepare a work sheet, which is a tool used in the preparation of financial statements. Final entries and none of these answers are not accounting terms.

Question 2

Which of the following statements is incorrect? 76)

Accepted Answer

Permanent accounts are another name for real accounts, not nominal accounts. Nominal accounts are temporary accounts that are closed at the end of each accounting period.

Question 3

Internal documents prepared by accountants when organizing the information presented in formal reports to internal and external decision makers are called:

Accepted Answer

Working papers are used by accountants to organize the information that will be presented in formal reports to both internal and external decision makers. These papers are not typically meant for distribution, but rather serve as an internal tool for accountants to ensure the accuracy of the information presented in the final report.

Question 4

A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjustingentries, adjusted trial balance, and financial statements, and which is an optional step in the accounting process, is a(n):

Accepted Answer

The worksheet is a 10-column spreadsheet used to draft financial statements and is an optional step in the accounting process. It includes columns for the unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements. The other options, such as the adjusted trial balance and post-closing trial balance, are specific points in the accounting process and do not include all the information provided by a worksheet.

Question 5

Real accounts are

Accepted Answer

Real accounts are another name for permanent accounts, which are accounts that are not closed at the end of the accounting period and carry over to the next period. Examples of real accounts include asset, liability, and equity accounts.

Question 6

A company shows an $800 balance in Prepaid Insurance in the Unadjusted TrialBalance columns of the work sheet. The Adjustments columns show expired insurance of $600. This adjusting entry results in:

Accepted Answer

The adjusting entry for expired insurance will decrease the Prepaid Insurance account balance by $600, resulting in a new balance of $200 ($800 - $600). This will decrease expenses by $600 on the Income Statement, resulting in a $600 increase in profit. Therefore, the correct answer is C, as there will be $600 less profit than originally shown in the Unadjusted Trial Balance.

Question 7

If the Balance Sheet columns of a work sheet fail to balance when the amount of profit is added to the Balance Sheet Credit column, the cause could be:

Accepted Answer

The Balance Sheet columns of a work sheet should always balance after the amount of profit is added to the Balance Sheet Credit column. If they don't balance, it means there is an error in the entries made. One possible cause could be that a liability amount was entered in the Balance Sheet Debit column. This would result in an unbalanced Balance Sheet since liabilities should be entered in the Credit column.

Question 8

Accounts that are used to describe revenues, expenses, and owner's withdrawals, andare closed at the end of the reporting period, are:

Accepted Answer

Accounts used to describe revenues, expenses, and owner's withdrawals, and are closed at the end of the reporting period are known as temporary accounts. These accounts are temporary because they are only used to accumulate information for a specific period and are then closed out to a permanent account or zeroed out. This process prepares the accounts for the upcoming period and ensures that the company's financial statements accurately reflect its current financial position. Examples of temporary accounts include revenue accounts, expense accounts, and owner's withdrawal accounts.

Question 9

The information on a work sheet can be used to prepare

Accepted Answer

The information on a work sheet can be used to prepare interim financial statements, adjusting entries, closing entries, and year-end financial statements. Therefore, all of these answers are correct.

Question 10

When closing entries are made

Accepted Answer

Closing entries are made to close all temporary accounts (revenues, expenses, and dividends) to prepare them for the next accounting period, while permanent accounts (assets, liabilities, and equity) remain open.

Question 11

The Unadjusted Trial Balance columns of a work sheet total $84,000Office supplies used during the period, $1,200Expiration of prepaid rent, $700.(3)Accrued salaries expense, $500Depreciation expense, $800.(5)Accrued repair service fees receivable, $400.The Adjusted Trial Balance columns total:

Accepted Answer

The adjustments total $3,600 ($1,200 + $700 + $500 + $800 + $400). Adding these to the unadjusted total of $84,000 gives $87,600. However, adjustments affect both debits and credits equally, so the adjusted total remains $84,000.

Question 12

Accumulated Depreciation, Equipment, Accounts Receivable, and Service Revenue would be sorted to which respective columns in completing a work sheet?

Accepted Answer

- Accumulated Depreciation and Equipment would be sorted to the Statement of changes in equity or Balance Sheet. Accumulated Depreciation is a contra-asset account that shows the accumulated depreciation of the assets of a company, while Equipment is an asset account that shows the total value of equipment owned by a company. Therefore, Accumulated Depreciation would be sorted to the credit column of the Statement of changes in equity or Balance Sheet, and Equipment would be sorted to the debit column of the Statement of changes in equity or Balance Sheet.
- Accounts Receivable would also be sorted to the Statement of changes in equity or Balance Sheet as it is an asset account. As it represents money owed to the company by its customers, it would be sorted to the debit column of the Statement of changes in equity or Balance Sheet.
- Service Revenue would be sorted to the Income Statement as it represents the revenue earned by providing services. It would be sorted to the credit column of the Income Statement.

Question 13

The Unadjusted Trial Balance columns of the work sheet show the balance in the Office Supplies account at $750. The Adjustments columns show that $425 of these supplies were used during the period. The amount shown as Office Supplies in the Balance Sheet columns is:

Accepted Answer

The $425 of supplies used during the period must be subtracted from the Unadjusted Trial Balance amount of $750, leaving a balance of $325. Since the supplies were already purchased and no additional purchases were made during the period, the balance of $325 is a debit balance, meaning the supplies were used and the asset account is reduced. Therefore, the answer is D.

Question 14

Closing the temporary accounts at the end of each accounting period

Accepted Answer

Closing temporary accounts involves resetting the balances of revenue, expense, and withdrawal accounts to zero, transferring their balances to the equity account, and preparing them for the next period.

Question 15

Another name for temporary accounts is

Accepted Answer

Temporary accounts, also known as nominal accounts, are accounts that are only used for a specific period of time, typically a fiscal year. Examples include revenue, expense, and dividend accounts. These accounts are closed at the end of the fiscal year and their balances are transferred to permanent accounts.

Question 16

Which of the following errors would cause the balance sheet columns of a work sheet to be out of balance?

Accepted Answer

Entering a revenue amount in the Balance Sheet Debit column would cause the balance sheet columns to be out of balance because revenues should be recorded in the Income Statement Credit column, not in the Balance Sheet.

Question 17

The Income Summary account is

Accepted Answer

The Income Summary account is used in the closing process to summarize the amounts of revenues and expenses, is not a permanent account, is the account from which the amount of profit or loss is transferred to the owners' capital accounts in a partnership, and is a temporary account. Therefore, all of these answers are correct.

Question 18

Which of the following statements is incorrect? 66)

Accepted Answer

The incorrect statement is A. On the worksheet, the adjusted amounts are sorted into columns for the adjusted trial balance, not the unadjusted trial balance.

Question 19

If, in preparing a work sheet, an adjusted trial balance amount is sorted to the wrong work sheet column, the Balance Sheet columns will balance on completing the work sheet, but with the wrong profit, if the amount sorted in error is:

Accepted Answer

The answer of If, in preparing a work sheet, an...

Question 20

Accounts that are used to describe assets, liabilities, and equity, that are not closed aslong as the company continues to own the assets, owe the liabilities, or have equity, and whose balances appear on the balance sheet are called:

Accepted Answer

Permanent accounts are used to describe assets, liabilities, and equity that remain open as long as the company owns the assets, owes the liabilities, or has equity. The balances of permanent accounts appear on the balance sheet. Nominal accounts, contra accounts, accrued accounts, and temporary accounts are all types of accounts that are closed at the end of an accounting period.

Quiz 4: Completing the Accounting Cycle and Classifying Accounts