Accounting test 6.1 (January 16 and 17)

List the 8 steps in order

1. analyze business transactions 2. journalize the transactions 3. post to ledger accounts 4. prepare a trial balance 5. prepare financial statements 6. journalize and post adjusting entries 7. journalize and post closing entries 8. prepare a post closing trial balance

the heading for a post closing trial balance has a date line that is similar to the one found on the a.) balance sheet b.) income statement c.) owner's equity statement d.) worksheet

A

Begins with an analysis of transactions and ends with the post-closing trial balance

Accounting cycle

The final closing entry to be journalized is typically the entry that closes the a.) revenue accounts b.) owner's drawings account c.) owner's capital account d.) expense accounts

B

the balances that appear on the post-closing trial balance will match the a.) income statement account balances after adjustments b.) balance sheet account balances after closing entries c.) income statement account balances after closing entries d.) balance sheet account balances after adjustments

B

Indicate the worksheet column (income statement Dr., balance sheet Cr.) to which each of the following accounts accumulated depreciation- Equipment

BS; CR

Indicate the worksheet column (income statement Dr., balance sheet Cr.) to which each of the following accounts Owner's drawings

BS; DR

Indicate the worksheet column (income statement Dr., balance sheet Cr.) to which each of the following accounts Prepaid insurance

BS; DR

Indicate the worksheet column (income statement Dr., balance sheet Cr.) to which each of the following accounts accounts receivable

BS; DR

The final step on the accounting cycle is to prepare a.) closing entries b.) financial statements c.) a post closing trial balance d.) adjusting entries

C

The first required step in the accounting cycle is a.) adjusting entries b.) journalizing transactions in the book of original entry c.) analyzing transactions d.) posting transactions

C

Which of the following is a true statement about closing the books of a proprietorship? a.) expenses are closed to the expense summary account b.) only revenues are closed to the income summary account c.) revenues and expenses are closed to the income summary account d.) revenues, expenses, and the owner's drawings account are closed to the income summary account

C

correcting entries a.) always affect at least one balance sheet account and one income statement account b.) affect income summary accounts only c.) affect balance sheet accounts only d.) may involve any combination of accounts in need of correction

D

determine whether the statement is true or false a worksheet is a mandatory form that must be prepared along with an income statement and balance sheet

F

determine whether the statement is true or false closing entries are unnecessary if the business plans to continue operating in the future and issue financial statements each year

F

determine whether the statement is true or false correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period

F

determine whether the statement is true or false it is not necessary to prepare formal financial statements if a worksheet had been prepared because the financial position and net income are shown on the worksheet

F

determine whether the statement is true or false the balance of the accumulated depreciation account will appear in the income statement debit column of a worksheet

F

Indicate the worksheet column (income statement Dr., balance sheet Cr.) to which each of the following accounts Service Revenue

IS; CR

Indicate the worksheet column (income statement Dr., balance sheet Cr.) to which each of the following accounts Interest expense

IS; DR

determine whether the statement is true or false after closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances

T

determine whether the statement is true or false if total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income

T

determine whether the statement is true or false the balance of the depreciation expense account will appear in the income statement debit column of a worksheet

T

determine whether the statement is true or false the post closing trial balance is prepared to prove the equality of debits and credits in the ledger after closing entries have been journalized and posted

T

determine whether the statement is true or false to close net income to owner's capital, income summary is debited and owner's capital is credited

T

The worksheet is a.) a device used in preparing adjusting entries and the financial statements b.) a journal c.) a part of the general ledger d.)a permanent accounting record

a.) a device used in preparing adjusting entries and the financial statements

the steps in the preparation of a worksheet do not include a.) analyzing documentary evidence b.) preparing a trial balance on the worksheet c.) entering the adjustments in the adjustment columns d.) entering adjusted balances in the adjusted trial balance columns

a.) analyzing documentary evidence

a post closing trial balance will show a.) only permanent account balances b.) only temporary account balances c.) zero balances for all accounts d.) the amount of net income (or loss) for the period

a.) only permanent account balances

the balance in the income summary account before it is closed will be equal to a.) the net income or loss on the income statement b.) the beginning balance in the owner's capital account c.) the ending balance in the owner's capital account d.) zero

a.) the net income or loss on the income statement

closing entries are journalized and posted a.) before the financial statements are prepared b.) after the financial statements are prepared c.) at managements discretion d.) at the end of each interim accounting period

b.) after the financial statements are prepared

The post-closing trial balance contains only a.) income statement accounts b.) balance sheet accounts c.) balance sheet and income statement accounts d.) income statement, balance sheet, and owner's equity statement accounts

b.) balance sheet accounts

the post closing trial balance contains only a.) income statement accounts b.) balance sheet accounts c.) balance sheet and income statement accounts d.) income statement, balance sheet, and owner's equity

b.) balance sheet accounts

in preparing closing entries a.) each revenue account will be credited b.) each expense account will be credited c.) the owner's capital account will be debited if there is net income for the period d.) the owner's drawings account will be debited

b.) each expense account will be credited

The information for preparing a trial balance on a worksheet is obtained from a.) financial statements b.) general ledger accounts c.) general journal entries d.) business documents

b.) general ledger accounts

a worksheet can be thought of as a(n) a.) permanent accounting record b.) optional device used by accountants c.) part of the general ledger d.) part of the journal

b.) optional device used by accountants

Each of the following accounts is closed to income summary except a.) expenses b.) owner's drawings c.) revenues d.) all of these accounts are closed to income summary

b.) owner's drawings

the final closing entry to be journalized is typically the entry that closes the a.) revenue accounts b.) owner's drawings account c.) owner's capital account d.) expense accounts

b.) owner's drawings account

balance sheets are considered to be a.) temporary owner's equity accounts b.) permanent accounts c.) capital accounts d.) nominal accounts

b.) permanent accounts

the purpose of the post-closing trial balance is to a.) prove that no mistakes were made b.) prove the equality of the balance sheet account balances that are carried forward into the next accounting period c.) prove the equality of the income statement account balances that are carried forward to the next accounting period d.) list all the balance sheet accounts in alphabetical order for easy reference

b.) prove the equality of the balance sheet account balances that are carried forward into the next accounting period

closing entries are necessary for a.) permanent accounts only b.) temporary accounts only c.) both permanent and temporary accounts d.) permanent or real accounts only

b.) temporary accounts only

when a worksheet is used, adjusting entries are prepared from a.) source documents b.) the adjustments columns of the worksheet c.) the general ledger d.) last year's worksheet

b.) the adjustments columns of the worksheet

closing entries are made a.) in order to terminate the business as an operating entity b.) so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts c.) in order to transfer net income (or loss) and owner's drawings to the owner's capital account d.) so that financial statements can be prepared

c.) in order to transfer net income (or loss) and owner's drawings to the owner's capital account

a worksheet is a multiple column form that facilitates the a.) identification of events b.) measurement process c.) preparation of financial accounts d.) analysis process

c.) preparation of financial accounts

If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has a.) earned net income for the period b.) an error because debits to not equal credits c.) suffered a net loss for the period d.) to make an adjusting entry

c.) suffered a net loss for the period

The worksheet does NOT show a.) net income b.) revenue and expense account balances c.) the ending balance in the owner's capital account d.) the trial balance before adjustments

c.) the ending balance in the owner's capital account

When constructing a worksheet, accounts are often needed that are NOT listed in the balance already entered on the worksheet from the ledger. Where should these additional accounts be shown on the worksheet? a.) they should be inserted in alphabetical order into the trial balance accounts already given b.) they should be inserted in chart of account order into the trial balance already given c.) they should be inserted on the lines immediately below the trial balance totals d.) they should not be inserted on the trial balance until the next accounting period

c.) they should be inserted on the lines immediately below the trial balance totals

These accounts are among the accounts in Sportsline's adjusted trial balance in the worksheet Accounts payable $15,000 Accounts receivable $19,000 Cash $9,000 Equipment $30,000 Notes Payable $10,000 Owner's Capital $33,000 What are the total debits in the adjusted trial balance in the worksheet, based only on these accounts? a.)$39,000 b.)$54,000 c.)$58,000 d.)$91,000

c.)$58,000

Temporary accounts are...

closed

entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent owner's equity account

closing entries

entries to correct errors made in recording transactions

correcting entries

These accounts are among the accounts in Sportsline's adjusted trial balance in the worksheet: Accumulated depreciation $15,000 Depreciation expense 5,000 Insurance expense 3,000 Prepaid insurance 6,000 Salaries and Wages expense 20,000 Salaries and Wages Payable 7,000 What is the total in the balance sheet credit column, based only on these accounts? a.) $7,000 b.) $12,000 c.) $18,000 d.) $22,000

d.) $22,000

the closing process consists of closing a.) all asset and liability accounts b.) out the owner's capital account c.) all permanent accounts d.) all temporary accounts

d.) all temporary accounts

Preparing a worksheet involves a.) two steps b.) three steps c.) four steps d.) five steps

d.) five steps

the income summary account a.) is a permanent account b.) appears on the balance sheet c.) appears on the income statement d.) is a temporary account

d.) is a temporary account

in order to close the owner's drawing account, the... a.) income summary account should be debited b.) income summary account should be credited c.) owner's capital account should be credited d.) owners capital account should be debited

d.) owners capital account should be debited

an error has occurred in the closing process if a.) revenue and expense accounts have zero balances b.) the owner's capital account is credited for the amount of net income c.) the owner's drawings account is closed to the owner's capital account d.) the balance sheet accounts have zero balances

d.) the balance sheet accounts have zero balances

Which of the following is an optional step in the accounting process? a.) adjusting entries b.) closing entries c.) correcting entries d.) worksheet

d.) worksheet

a temporary account used in the closing process

income summary

account to which owner's drawing is closed

owner's capital

Determine whether the account is permanent or temporary accounts payable

permanent

Determine whether the account is permanent or temporary accumulated depreciation

permanent

Determine whether the account is permanent or temporary cash

permanent

Determine whether the account is permanent or temporary owner's capital

permanent

Determine whether the account is permanent or temporary prepaid insurance

permanent

balance sheet accounts whose balances are carried forward to the next period

permanent accounts

step after closing entries

post closing trial balance

closed to income summary

service revenue

Determine whether the account is permanent or temporary interest revenue

temporary

Determine whether the account is permanent or temporary owner's drawings

temporary

Determine whether the account is permanent or temporary rent expense

temporary

income statement accounts and the drawing account

temporary accounts

an optional tool which facilitates the preparation of financial statements

worksheet

Net Income Equation

Net Income = Revenues - Expenses