Accounting test number 2

A work sheet is

tool for the end-of-period process

A contra-asset account is an offsetting or opposite account and should be deducted from the related asset account.

true

A net loss occurs when the work sheet income statement debit column is greater than the credit column.

true

Accrued salaries represent salaries earned by employees but not paid as of the last day of the accounting cycle

true

Accrued wages are wages that have been earned but have not yet been paid.

true

Accumulated Depreciation has a normal credit balance

true

Adjusting entries are prepared from the adjustments columns of the work sheet.

true

Adjustments show increases or decreases to accounts and are made at the end of the accounting period to show actual balances and to match expenses with revenues.

true

After posting the adjusting entries, the balances in ledger accounts are now the same as those shown in the Adjusted Trial Balance columns of the work sheet.

true

After the closing process is complete, only permanent accounts will have balances.

true

An adjusting entry for accrued wages will result in a liability account (Salaries Payable) having a balance that carries forward to the next accounting period.

true

An adjusting entry is a general journal entry to record end-of-period adjustments to an account.

true

Closing entries are entered in the general journal immediately below the adjusting entries under the heading "Closing Entries."

true

Immediately after journalizing and posting adjusting entries, all temporary owner's equity accounts are closed.

true

Reversing entries are prepared on the first day of the new accounting period.

true

Reversing entries are used to eliminate balances in asset or liability accounts so that entries made in future accounting periods will be correct without considering balances caused by adjusting entries.

true

Temporary accounts are used to record revenue and expenses and are closed at the end of the accounting period.

true

The account Income Summary is closed during the closing process.

true

The final closing entry is to close the owner's drawing account.

true

The first step in the closing process is to close the revenue account(s).

true

The post-closing trail balance ensures that the accounting equation is in balance at the beginning of the new accounting period.

true

The post-closing trial balance is dated as of the last day of the accounting period.

true

The statement of owner's equity shows the ending balance in the capital account for the period.

true

The trial balance columns of the work sheet must be totaled and corrected, if there are errors, before continuing.

true

To "close out" is to remove balances from accounts.

true

Under Modified Accrual accounting, revenue and expenses are recognized only when cash is received or paid.

true

When adjustments are not recorded, net income is either understated or overstated.

true

When closing entries are posted to ledger accounts, temporary accounts will have a zero balance.

true

When the account Income Summary is credited to close it, there is a net loss.

true

Which of these accounts will have a zero balance after closing entries are posted?

wages expense

A work sheet is used by accountants at the beginning of an accounting period to ensure all accounts are still in balance

False

Which of these accounts will not have a zero balance after closing entries are posted?

J. Smith, capital

Interim financial statements are statements covering less than a year.

True

The accounting cycle is the term used to describe the steps involved in accounting for all business activities during a time period.

True

Which of these is a current liability?

accounts payable

All asset and liability accounts, along with the capital and drawing accounts, are extended to which columns of the work sheet?

balance sheet

Assets, liabilities, and owner's equity are listed on which financial statement?

balance sheet

The owner's drawing account would be extended to which columns of the work sheet?

balance sheet

Which of these is a long-term asset?

building

When the account Income Summary is closed, which account receives the balance?

capital account

When a revenue account is closed, it is:

debited

Which of these accounts is not listed on a formal balance sheet?

drawing account

A credit balance in the account Income Summary indicates there is a net loss for the period.

false

A net loss occurs when the work sheet income statement credit column is greater than the debit column.

false

Account numbers are entered in the posting reference column of the journal as the adjusting entries are journalized.

false

After adjusting entries are posted to general ledger accounts, it is not necessary to compute new account balances.

false

Book value represents the depreciable cost of an asset, less the year's depreciation expense.

false

Current liabilities are debts that will be paid in one year or longer.

false

Each account listed on the income statement and on the balance sheet is a temporary account.

false

Income Statement accounts that received balances in the adjusting entries are not closed in the closing entries.

false

Once revenue and expense accounts are closed to the account Income Summary, the difference-called net income or net loss-is closed to the drawing account.

false

Reversing entries must be used in order to ensure that the same expenses are not recognized in two accounting periods.

false

The account Income Summary is a permanent owner's equity account with an ongoing balance.

false

The post-closing trial balance is a formal financial statement.

false

The post-closing trial balance is a listing of all temporary and permanent accounts and their balances at the end of the accounting period.

false

To close the owner's drawing account, a debit to the drawing account is required.

false

When reversing entries are not used, there is an error because duplication will occur automatically.

false

When the closing process is complete, the account Income Summary will have a credit balance.

false

Adjusting entries are prepared:

from worksheet

All revenue and expense accounts appear in which columns of the work sheet?

income statement

Professional Fees would be extended to which columns of the work sheet?

income statement

The fourth pair of columns in the work sheet are which columns?

income statement

The income statement is prepared from which columns of the work sheet?

income statement

Which financial statement is prepared first?

income statement

Which of these is a temporary account?

insurance expense

The work sheet lists all accounts in the general ledger that have a balance or will soon have a balance after adjustments are entered.

True

The adjustment to enter salaries earned but not yet paid is called:

accrual

When an expense is incurred but not yet paid, or revenue is earned but not yet received, this is known as a(n):

accrual

Which of these is a contra-asset account?

accumulated

Which of these is a permanent account?

accumulated depreciated-equipment

Book value is original cost minus:

accumulated depreciation

When depreciation on office equipment is entered as an adjusting entry, which of these accounts is credited?

accumulated depreciation

A reversing entry is used to reverse which of the following?

adjusting entry

Which of these accounts is a permanent account?

cash

Which of these is a current asset?

cash

Which of these is a permanent account?

cash

A decimal number (such as 141.1) is used to indicate which type of account?

contra-asset

Detailed explanations are required for adjusting entries in the general journal.

false

Estimated salvage value is a precise and calculated amount that an asset will be worth at the end of its useful life

false

On the income statement, expenses are listed chronologically by account order.

false

Owner's withdrawals are found in the balance sheet credit column.

false

The account Cash will appear in the income statement columns of the work sheet.

false

The balance sheet is a formal listing of the assets, revenues, and liabilities of the business.

false

The third pair of columns in a 10-column work sheet is called the income statement.

false

The work sheet is a financial statement and is prepared in pen.

false

There is a source document, such as a receipt, to evidence each adjusting entry that is needed at the end of the month.

false

When Depreciation Expense is debited, the asset account, such as Automobile, is credited in the adjusting entry.

false

Statements prepared for less than one year are called:

interim financial statement

Adjusting entries are used to fulfill which accounting concept?

matching

Which of these accounts is a temporary account?

miscellaneous

Every adjusting entry has an effect on:

net income

There is a net increase in capital when:

net income exceeds owner's withdrawal

If the debit column of the income statement columns is greater than the credit column, the result is a called a:

net loss

When Income Summary has a debit balance after revenue and expense accounts are closed,

net loss

Which of these accounts would show a debit balance in the trial balance columns of the work sheet?

office supplies

Income Summary is which type of account?

owner's equity

When expired insurance is entered as an adjusting entry at the end of the accounting period, which of these accounts is credited?

prepaid insurance

Adjusting entries:

prepared at the end of the accounting period

Which of these is prepared at the end of the accounting period?

preparing the work sheet

The post-closing trial balance lists all but which of the following?

revenue

Which type of account is closed first in the closing process?

revenue

When a reversing entry is not used for accrued wages, which accounts must be debited when wages are paid the following accounting period?

salaries expense and salaries payable

Which of these adjusting entries would be subject to using a reversing entry?

salaries expense, salaries payable

Which of these accounts represents an accrued expense?

salaries payable

When supplies used up are recorded as an adjustment, which of these accounts is credited?

supplies

In the adjusting entry for the amount of supplies used at the end of the month, which account is debited?

supplies expense

Closing entries are used to close which type of accounts?

temporary

Accumulated Depreciation is a contra-asset account.

true

Adjusted trial balance columns are totaled to prove the equality of debits and credits.

true

Adjusting entries are entered in the general journal under the heading "Adjusting Entries."

true

Adjusting entries are used to comply with the matching concept.

true

Adjustments are increases or decreases to accounts that are indicated on the work sheet at the end of the period.

true

Current assets are those that will be used up with the year or the accounting period, whichever is longer.

true

Every adjusting entry has an effect on net income.

true

Everything the accountant needs to prepare the income statement appears in the income statement columns of the work sheet.

true

Land, building, and automobiles are examples of long-term assets.

true

Liquidity relates to how quickly current assets can be converted into cash or used up as an expense.

true

Month end adjusting entries appear in the general journal immediately following the month's journal entries for transactions.

true

The adjustments debit account shows the amount to be debited to an account in the adjusting entries.

true

The difference between the balance sheet debit and credit columns of the work sheet represents net income or net loss.

true

The difference between the income statement debit and credit columns of the work sheet represents net income or net loss

true

The ending owner's capital as of the end of the period will be used on the balance sheet.

true

The income statement is considered to be one of the most important financial statements.

true

The owner's drawing account will appear in the balance sheet columns of the work sheet.

true

The statement of owner's equity is the connecting link between the income statement and the balance sheet.

true

The word "adjusting" should appear in the item column of general ledger accounts when adjusting entries are posted.

true

When net income exceeds owner's withdrawals, there is a net increase in capital for the period.

true

When owner's withdrawals exceed net income, there is a net decrease in capital for the period.

true