Financial Accounting Exam 2

Multiple step income statement can answer following questions except:

Current Ratio

Accounts payable is a temporary account.

False

Accrued salaries payable is a temporary account.

False

Accumulated depreciation is a temporary account.

False

An important purpose of closing entries is to set permanent account balances to zero in order to begin the next period.

False

As you prepare a cash flow statement, you found that your accounts receivable increased compared to previous year. Therefore, you added this difference to the net income to calculate the net cash provided by operating activities.

False

Balance sheet has temporary accounts.

False

The major purpose of closing entries is to set permanent account balances to zero in order to begin the next accounting period.

False

After closing entries, all temporary accounts are merged into one permanent account, and this account will be listed in the balance sheet. The name of this account is

Retained Earnings

If the total debit column exceeds the total credit column of the income statement columns on a work sheet, then the company has

Suffered Net Loss

The dividends, revenue, and expense accounts are temporary accounts.

True

The major purpose of cash flow statement is to provide information about cash receipts and cash payment during an accounting period.

True

To close a revenue account, you need to debit revenue and credit income summary.

True

The final step in the accounting cycle is to prepare

a post-closing trial balance

In preparing closing entries

each expense account will be credited

An error has occurred in the closing entry process if

the balance sheet accounts have zero balances

A temporary account, Income Summary, is used in closing revenue and expense accounts.

True

As you prepare a cash flow statement, you found that your accounts payable increased compared to previous year. Therefore, you added this difference to the net income to calculate the net cash provided by operating activities.

True

Depreciation expense is a temporary account.

True

In general, the most important section of cash flow statement is the section for operating activities.

True

Income statements is composed of temporary accounts.

True

Closing entries are journalized and posted

after the financial statements are prepared

The proper sequence for the accounting cycle is

analyze, journalize, post, adjust, prepare statements, close