CH 4

Which of the following statements correctly describes what a work sheet is?

-A work sheet helps to organize financial data -A worksheet is a tool used by accountants -A work sheet is prepared at the end of an accounting period -A work sheet does not substitute for financial statements

What are the benefits of using a work sheet?

-Aids in the preparation of financial statements. -Reduces the possibility of errors when working with many accounts and adjustments - Link accounts and adjustments to their impact on financial statements. -Helps in preparing interim (monthly and quarterly) financial statements when journalizing adjusting entries is postponed until year-end. -Shows the effects of proposed or "what-if" transactions.

Describe the General Ledger after the adjusting & closing entries have been posted.

-All expense accounts and Owners Withdrl account will be zero balance. -Income Summary will show three closing entries. -The abbrevaitions adj. and clos will be entered in the explanation columns on the ledger. -The owner, withdrawal account will have a $0 balance after closing.

explain how to add adjusted accounts to a work sheet when they did not appear on the trial balance

-New accounts can be added on blanks lines following the totals line on the trial balance -The adjusted account can be squeezed in on one line of the trial balance

How can you add adjusted accounts to a work sheet when they did not appear on the trial balance?

A new line can be added following the TOTAL line on the trial balance.

What is a work sheet?

A work sheet is a document that is used internally by companies to help with adjusting and closing accounts and with preparing financial statements. -Include a trial balance and adjusted trial balance, as well as columns for the income statement and balance sheet -A completed work sheet will include a list of account, their balance and adjustments, and their sorting into financial statement columns. -When used to prepare financial statements, it is constructed at the end of a period -A form of working papers used by accountants and can be helpful in preparing financial statements. statements, end, adjustments, adjusted

What is keying?

Adding an identifying letter to link the debit and the credit of an adjustment in the adjustments columns

Sort adjusted trial balance amounts to the financial statement columns

After an adjusted trial balance is prepared, what is the next step in completing the work sheet used in preparing financial statement?

The following categories are on a classified balance sheet. List them in the order that they would appear

Current Asset Long-term investment Plant asset Intangible asset Current Liabilities Long term liabilities

What are current liabilities

Current liabilities are reported in the order of those to be settled first. Current liabilities are obligations due to be paid within one year Current liabilities are usually settled by paying out current assets such as cash.

journalizing and posting adjusting entries from the work sheet is aided by which of the following

Keying

What defines a long-term investment?

Long-term investments are sometimes referred to as non current investments. Notes receivable and stock and bond investements are assets that are expected to be held for more than one year.

Accounting cycle

Refers to the steps in preparing financial statement Repeated each reporting period and refers to the steps taken in preparing financial statements.

formal financial statements can be prepared from the columns of a work sheet. Which of the statement below are true regarding this process?

The debit column of the income statement columns represent the expenses reported on the income statement

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 loss

Review the statements below and select the items that are correct regarding the operating cycle for a bussiness

The length of a company's operating cycle depends on its activities most operating cycles are less than one year The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from sale of goods services Most companies use one-year period or operating cycle in deciding which asssets

review the following statements and select which is correct regarding a worksheet and formal financial statement

The withdrawal's account balance will be used in preparing the statement of owner's equity

Select the statement below describe the purpose of a posting closing trial balance

To verify that all temporary accounts have zero balance To verify that total debits equal credit for permanent accounts.

Before sorting/transferring amounts to the financial statements columns on a worksheet what must happen?

the trial balance adjustments and adjusted trial balance columns must balance (adjustments, balance)