act week 5
Based on these totals, the company experienced a net (a)_____ of (b)$_____.Income Statement:Debit $10000Credit $7500Balance SheetDebit $41000Credit $43500
(a) loss (b) 2500
Review the following statements and select the ones that are correct regarding sorting accounts from the Adjusted Trial Balance columns of a work sheet to the Income Statement and Balance Sheet columns in order to prepare for our last step of completing the worksheet.
-Liabilities go to the Balance Sheet & Statement of Owner's Equity Credit column. -Owner, Withdrawals go to the Balance Sheet & Statement of Owner's Equity Debit column. -Expense accounts go to the Income Statement Debit column.
Trial balance
A list of accounts and their balances at a point in time.
The Income Summary account can be defined as which of the following?
A temporary account An account used during the closing process An account that contains a credit for the sum of all revenues An account whose balance equals net income or net loss
Which of the statements below is correct regarding the difference between a temporary account and a permanent account?
A temporary account will not appear on a post-closing trial balance.
Which of the following statements correctly describes what a work sheet is?
A work sheet helps to organize financial data. A worksheet is an aid used by accountants. A work sheet does not substitute for financial statements. A work sheet is prepared at the end of an accounting period.
Which of the following statements is (are) correct about completing a work sheet?
Adding net income to the Credit column of the Balance Sheet & Owner's Equity columns implies that it is to be added to Owner, Capital. If a loss occurs, it is added to the Debit column of the Balance Sheet. If a net income occurs, it is added to the Credit column of the Balance Sheet. If a net income occurs, it is added to the Debit column of the Income Statement.
Which of the following statements is correct regarding a work sheet and the adjustment process?
Adjusting journal entries are prepared from the Adjustments columns of a work sheet.
Work sheet
An internal accounting aid which helps in preparing financial statements.
Before sorting/transferring amounts to the financial statement columns on a worksheet, the Trial Balance, ----- (Income Statement, Adjustments) and Adjusted Trial Balance columns must ------(balance, clear).
Blank 1: adjustments Blank 2: balance
Review and complete the following statement regarding the Income Summary account. 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----- (Capital/Cash) account
Blank 1: credited Blank 2: debited Blank 3: capital
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.
Blank 1: end Blank 2: adjusted Blank 3: afte
A post-closing trial balance is a list of ----(permanent/temporary) accounts and their balances ----(after/before) all ----(adjusting/closing) entries have been journalized and posted.
Blank 1: permanent Blank 2: after Blank 3: closing
Closing means to transfer account balances from------ (asset/liability/permanent/temporary) accounts so that they will start with a-------- (contra/larger/zero) balance at the beginning of the next period.
Blank 1: temporary Blank 2: zero
Current items can be described as those expected to come due within one---- (month/year) and are listed in the order of how ----(quickly/slowly) they could be converted to or paid in cash
Blank 1: year Blank 2: quickly
Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet.
Bonds payable Mortgage payable Notes payable
Which of the following accounts would be sorted from the Adjusted Trial Balance of a work sheet to the Balance Sheet & Statement of Owner's Equity columns on a work sheet?
Cash; Accounts payable; Owner, Withdrawals
Summarize the steps in the closing process by selecting the correct choice below.
Close income statement credit balance accounts; close income statement debit balance accounts; close income summary; close withdrawals.
Choose the statement below that explains what "closing" means.
Closing means to reset an account balance to zero
Define "current" as it applies to 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.
What are current liabilities?
Current liabilities are usually settled by paying out current assets such as cash. Current liabilities are liabilities due to be paid within one year.
Which of the following is correct regarding a work sheet?
Each set of column totals must balance on the Trial Balance columns, Adjustments columns and the Adjusted Trial Balance columns.
Identify which of the following steps in the accounting cycle is optional.
Reversing journal entries
After an adjusted trial balance is prepared, what is the next step in completing the work sheet used in preparing financial statements?
Sort adjusted trial balance amounts to the financial statement columns.
Identify the accounts below that would be classified as current liabilities on a classified balance sheet.
Taxes payable Accounts payable Unearned rent
Formal financial statements can be prepared from the columns of a work sheet. Which of the statements below are true regarding this process?
The Debit column of the Income Statement columns represent the expenses reported on the Income Statement.
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.
Review the following statements and select which is correct regarding a work sheet and formal financial statements.
The Withdrawals account balance will be used in preparing the statement of owner's equity.
Given that a company reported net income for the year, determine how a company would complete its work sheet for the period by choosing the correct statement below.
The company would add the net income amount to the Credit column of the Balance Sheet & Owner's Equity columns of a work sheet.
Determine which of the statements below are correct regarding the current ratio.
The current ratio is one measure of a company's ability to pay its short-term debts. The current ratio helps a supplier determine whether it wants to extend credit to a customer. A current ratio of less than 1.0 would indicate that a company might have a problem paying off short term debt. The current ratio can affect interest rates charged by creditors when lending money to a business.
Which of the following statements correctly summarizes how to compute net loss or net income using a work sheet?
The difference between the totals of the debit and credit columns of the Income Statement columns is net income or net loss.
Which of the following lists steps of the accounting cycle in the correct order (note that not all steps are listed)?
Trial balance, Adjusting journal entries, Post-closing trial balance.
Recall the column headings of a work sheet used to prepare financial statements. Which of the following items are on a worksheet.
Unadjusted Trial Balance columns Income Statement columns Adjusted Trial Balance columns Adjustment columns Balance Sheet & Statement of Owner's Equity columns
When does the closing process take place?
at the end of an accounting period
Current assets are:
cash and other resources that are expected to be sold, collected or used within one year
A classified balance sheet can be described as a balance sheet that:
lists current assets in the order of how quickly they can be converted to cash. organizes assets and liabilities into important subgroups.
A classified balance sheet can be described as a balance sheet that
organizes assets and liabilities into important subgroups. lists current assets in the order of how quickly they can be converted to cash.
Income statement
Reports a business's revenues and expenses for a period of time.
Statement of cash flows
Reports the inflows and outflows of cash during a period of time.
Select the statement(s) below which correctly describe how to use the work sheet in the adjustment process.
Information from the Adjustments columns are used for the adjusting journal entries. Journalizing and posting adjusting entries is required after adjustments are entered in a work sheet.
What is a work sheet?
It can help with adjusting and closing accounts and with preparing financial statements.
Define the Income Summary account.
It is a temporary account used during the closing process to summarize revenues and expenses.
Which of the following defines long-term liabilities?
Long-term liabilities are debts of a business that are not due to be settled within one year.
Which statements below are true regarding permanent and temporary accounts?
Most temporary accounts are reported on the income statement. Temporary accounts have a balance for one period only. Permanent accounts are reported on the balance sheet. Permanent accounts will appear on a post-closing trial balance. Owner, Capital is a permanent account, but Owner, Withdrawals is a temporary account.
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 investments in stocks and bonds when they are expected to be held for more than one year or the operating cycle.
Identify the accounts below that would be classified as a long-term investment.
Notes receivable due in 2 years Investments in bonds Investments in stocks
Select the statements below that describe the purpose of a post-closing trial balance.
One purpose is to verify that total debits equal total credit for permanent accounts. One purpose is to verify that all temporary accounts have zero balances.
A classified balance sheet has several categories for assets and liabilities including:
Plant assets. Noncurrent (long-term) liabilities. Long-term investments. Current assets.
Balance sheet
Reports a business's assets, liabilities and equity on a specific date.