Module 4/Unit 4: The Accounting Cycle and Accounting Information Systems

Which three categories does the unclassified balance sheet include?

Assets, liabilities, and stockholders' equity.

True/False: The statement of stockholders' equity is sometimes called the statement of retained income.

False (retained earnings)

Which step in the accounting cycle is journalizing and posting adjusting entries?

Fifth

Which step in the accounting cycle includes beginning the worksheet?

Fourth

Step five of the accounting cycle is journalizing and posting adjusting entries. To do this, you should enter the adjusting entries in the [. ] and post them to the appropriate [. ].

General journal, ledger accounts

The [. ] show(s) the total amount of accounts receivable and accounts payable, but the details in the [. ] allow(s) companies to send bills to customers and pay bills to suppliers.

General ledger, subsidiary ledgers

Which statement best describes a classified balance sheet?

It breaks down assets and liabilities into current and long-term accounts.

The post-closing trial balance differs from the adjusted trial balance in only two important respects. First, it excludes all temporary accounts since they have been closed. What is the second difference?

It updates the Retained Earnings account to its proper ending balance.

Which of the following is not a component of a computerized accounting information system?

Manual ledgers

Business transactions are [ ] events that affect the [ ] condition of a business.

Measurable, financial

How are assets listed on the balance sheet?

Most liquid to least liquid

What is the last step of the accounting cycle?

Post-closing trial balance

Which step in the accounting cycle comes after journalizing transactions in the general journal?

Posting entries to the general ledger.

Which asset is considered current on the asset side of the typical balance sheet?

Prepaid expenses

Of the eight steps or processes of the accounting cycle that an accountant follows in each closing, which procedure is last?

Prepare the post-closing trial balance.

The end-of-year closing process transfers (1) the balances in the [. ] to a clearing account called Income Summary and then to Retained Earnings, and (2) the balance in the [. ] to the Retained Earnings account.

Revenue and expense accounts, Dividends account

[ ] journal entries involve one debit and one credit. [ ] journal entries involve more than one debit or credit.

Simple, compound

Which step in the accounting cycle includes preparing financial statements?

Sixth

A classified balance sheet contains the same three major categories and subdivides two of its three major categories. Which category is not subdivided?

Stockholders' equity

With the accrual basis of accounting, accountants recognize revenues when [ ]. Regardless of when [ ].

The company makes a sale or performs a service. The company receives the cash

Which statement about the worksheet is not correct?

The worksheet can be used instead of the general journal.

What purpose do special journals serve in accounting?

They group together similar transactions, like sales and purchases.

What is the role of accounting information systems?

To organize financial data

True/False: A transaction must be journalized in the journal before it can be posted to the ledger accounts.

True

True/False: Accountants May perform the closing process monthly or annually.

True

True/False: The computer automatically performs some of the steps in the accounting cycle, such as posting journal entries to the ledger accounts, closing the books, and preparing the financial statements.

True

True/False: The evidence that a business event has occurred is a source document.

True

True/False: The worksheet is not part of the formal accounting records.

True

True/False: When trying to discover which adjusting entries should be made, reviewing adjusting entries made at the end of the previous period is a good strategy to use.

True

When working on the adjusted trial balance column in the [. ], the Trial Balance and Adjustments columns both balance but the Adjusted Trial Balance columns do not. The most probable cause is [. ].

Worksheet, an error in extension

The [ ] is a series of steps performed during the accounting period to analyze, record, classify, summarize, and report useful financial information for the purpose of [ ] financial statements.

Accounting cycle, preparing

What is the first step of the accounting cycle?

Analyzing transactions

Accumulated depreciation and accumulated amortization are contra accounts to which type of accounts on basic financial statements?

Asset accounts

How do computerized accounting systems benefit accounting firms?

By organizing financial accounting data.

A post-closing trial balance is a trial balance taken after the closing entries have been posted. Some accounts stay open. They are assets, liabilities, Retained Earnings, and which other account?

Capital stock

A company performed delivery services for a customer for cash. The correct debit and credit are [ ].

Cash, Delivery Service Revenue

DBD Company paid Company A $15,000 for their outstanding receivable that had been outstanding for 40 days. Company A's credit terms with DBD were Net 30 days. To account for this $15,000 transaction, how should Company A record this event in the general journal?

Debit cash for $15,000 and credit accounts receivable for $15,000.

The revenue, expense, and which other accounts are reduced to zero during the closing step?

Dividends

Which account is a temporary, or nominal, account closed directly to the Retained earnings account at the end of the accounting period?

Dividends

When are worksheets prepared?

Each time financial statements are prepared.

True/False: Posting aids the tracing of any recorded transaction, either from general journal to general ledger or from general ledger to general journal.

False

True/False: Posting is the process of entering the effects of a transaction in a journal. Then, the information is transferred to the proper accounts in the ledger.

False

True/False: Postings must always be made at the end of each month.

False

True/False: The preparation of a worksheet eliminates the need to prepare and post adjusting entries.

False

True/False: The preparation of an unadjusted trial balance serves as a check on the accuracy of the closing process and ensures that the books are in balance at the start of the new accounting period.

False

True/False: The price of computers and accounting software packages have decreased to the point where all businesses have converted from manual to computerized systems.

False