accounting

which statements below are true regarding permanent and temporary accounts? (check all that apply)

Temporary accounts are reported on the income statement. Retained Earnings is a permanent account, but Dividends is a temporary account. Temporary accounts have a balance for one period only. Permanent accounts will appear on a post-closing trial balance. Permanent accounts are reported on the balance sheet.

Select the statement below that explains how to use the Income Summary account.

The Income Summary account is used during the closing process to facilitate the closing of revenue and expense accounts.

what defines long-term liabilities

debts of a business that are not due to be settled within one year

explain the accounting cycle

the accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.)

the closing process resets the balances in temporary accounts to zero. the closing process helps to summarize a period's revenues and expenses.

a classified balance sheet can be described as one that...

-is more useful to decision makers -organizes assets and liabilities into important subgroups -lists current assets in the order of how quickly they can be converted to cash

what are current liabilities

-obligations due to be paid within one year -reported in the order of those to be settled first -usually settled by paying out current assets such as cash

Sheldon Company had $500 for one day of accrued salaries on December 31 of the prior year. On January 4 of the current year, total salaries for the five-day week are paid. The journal entry to record the payment of salaries on January 4 includes:

Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000

The journal entry to close all of a company's expense accounts would include a credit (debit/credit) to each of the expense accounts and a corresponding debit(debit/credit) to the Income summary(statement/summary) account.

credit; debit; summary

the Income Summary account is __________ (debited/credited) for the sum of all revenue accounts and is ___________ (debited/credited) for the sum of all expense accounts and its balance will be transferred to the ______________ (Retained Earnings/Cash) account.

credited; debited; retained earnings

The closing process takes place at the (end/beginning) of an accounting period, after the (adjusted/unadjusted) trial balance is prepared and (after/before) the financial statements are prepared.

end; adjusted; after

define plant assets

- property, plant and equipment that are tangible - difficult to convert to cash quickly - equipment and other assets that have a life greater than one year

Select the statements below that describe the purpose of a post-closing trial balance. (check all that apply)

- to verify that all temporary accounts have zero balances - to verify that total debits equal total credit for permanent accounts

what defines a long-term investment

-notes receivable and stock and bond investments are assets that are expected to be held for more than one year -long-term investments are sometimes referred to as noncurrent investments

Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation.

1. prepare an unadjusted trial balance 2. journalize and post adjusting entries 3. prepare an adjusted trial balance 4. prepare financial statements

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence. In order to prepare the statement of retained earnings, the balance of the (Retained earnings / Cash) account balance as well as any debit balance in the (Dividends / Supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement.

retained earnings; dividends

Complete the following statement. The purpose of the closing process is to reset temporary (temporary/permanent) account balances to zero and to transfer the changes in all of these accounts to the Retained, earnings (Earnings/Summary/Withdrawal) account.

temporary; earnings

The Income Summary account can be defined as which of the following? (check all that apply)

An account used during the closing process A temporary account An account whose balance equals net income or net loss An account that contains a credit for the sum of all revenues

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below.

Debit Interest expense for $30.

For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below.

Debit Interest receivable for $600.

By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. Which of the following is the proper adjusting entry?

Debit Salaries expense for $500.

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction?

Debit accounts receivable and credit services revenue

accounts classified as long-term liabilities

- bonds payable (due in five years) - mortgage payable

Define the Salaries payable account by selecting the appropriate statement below.

It reports amounts owed to employees and is a liability.

current assets are

cash and other resources that are expected to be sold, collected, or used within one year

what type of account would appear in the equity section of a balance sheet

retained earnings

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.)

The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. The adjusted trial balance is used to prepare financial statements. The adjusted trial balance generally has more accounts listed than the unadjusted trial balance.

accounts classified as current liabilities

- taxes payable - notes payable (due in three months) - unearned rent - accounts payable

accounts classified as a plant asset account

-building -equipment -machinery -land currently being used

accounts classified as a long-term investment

-notes receivable due in 2 years - land held for future expansion - investments in bonds

Able Company owes interest on a note for a loan. The note is dated December 1 and is due on February 1. On December 31, interest expense should be accrued for the following period:

December 1 to December 31

Identify which group of accounts may require adjustments at the end of the accounting period.

Unearned revenue; Supplies; Prepaid rent

An adjusted trial balance is:

a list of accounts and balances after adjusting entries have been recorded and posted

accrued revenue

are earned in a period that are both unrecorded and not yet received in cash

examples of a current asset

cash, accounts receivable, office supplies, prepaid rent

define "current" in terms of assets and liabilities on a classified balance sheet

current items are those expected to come due within one year or the company's operating cycle, whichever is longer

select the statement below that describes a post-closing trial balance

it is a listing of all permanent accounts and their balances after closing

describe an unclassified balance sheet

one whose items are broadly grouped into assets, liabilities, and equity

a classified balance sheet has several categories for assets and liabilities including:

- long-term investments - current assets -noncurrent (long term) liabilities - plant assets

statements that correctly defines a profit margin

- is also called return on sales - ratio of a business's net income to its net sales - is a useful measure of a business's operating results

which of the statements are correct regarding the accounting cycle? (check all)

- it's a series of steps repeated each reporting period - it contains 10 steps - refers to steps followed by a company to prepare its financial statements - contains steps for adjusting and closing accounts

On December 28, I. Greasy Catering Company completed $600 of catering services. As of December 31, the customer had not been billed nor had the transaction been recorded. Demonstrate the required adjusting entry by choosing the correct statement below.

Debit Accounts receivable for $600.

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the (Unearned revenue/Accounts receivable/Cash/Interest receivable) account and (debit/credit) the (Cash/Accounts receivable/Interest revenue/Interest receivable) account.

interest receivable; credit; interest revenue

A post-closing trial balance is a list of (permanent/temporary) accounts and their balances from the (journal/ledger) (after/before) all (adjusting/closing) entries have been journalized and posted.

permanent; ledger; after; closing

Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. (Check all that apply.)

-The income statement is the first financial statement prepared after preparing the adjusted trial balance. -Financial statements are prepared more easily using the adjusted trial balance than with the general ledger. -The adjusted trial balance includes all accounts and balances appearing in financial statements. -The ending Retained Earnings account balance on the balance sheet is transferred from the statement of retained earnings.

accounts classified as a current asset

-accounts receivable - office supplies - prepaid rent - cash

Which of the statements below describe(s) a temporary account? (Check all that apply.)

A temporary account is closed at the end of an accounting period. A temporary account has a balance for only one period.

Which of the following describes accrued revenue? (Check all that apply)

They refer to revenues that are earned in a period, but have not been received and are unrecorded. They refer to earnings which have been earned but not yet billed. The adjustment causes an increase in an asset account and an increase in a revenue account. Accounts receivable is usually increased when accruing revenues.

Which of the following lists contains only temporary accounts?

Wages Expense; Income Summary; Dividends

Which of the accounts below are considered accrued expenses?

Wages expense, Interest expense

Determine which of the following transactions may require adjustments. (Check all that apply.)

a 24-month insurance policy was prepaid Supplies were purchased at the beginning of the year, but not all were used. Equipment was purchased in the middle of the year. Six months of rent were paid in advance. An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month.

In order to prepare a balance sheet using the account balances on an adjusted trial balance, all of the ________ (expenses/assets) and their debit balances are transferred to the balance sheet as well as all of the _____________ (liabilities/revenues) and their _________ (debit/credit) balances.

assets; liabilities; credit

accounts classified as intangible assets on a balance sheet:

copyrights, trademark, goodwill, patent, franchise

Illustrate your understanding of how to use the adjusted trial balance to prepare an income statement by completing the following sentence. In order to prepare an income statement using the account balances on an adjusted trial balance, all of the ________ (revenues/liabilities) and their credit balances are transferred to the income statement as well as all of the __________ (expenses/assets) and their ______ balances

revenues; expenses; debit