ch.4 accounting

Which account would appear in the post-closing trial balance?

Salaries Payable

real (permanent) accounts

Term for balance sheet accounts because they are relatively permanent and carried forward from year to year.

fiscal year

The annual accounting period adopted by a business.

Which of the following is true regarding the flow of data from the Adjusted Trial Balance columns of the end-of-period spreadsheet to the financial statements?

The balance of the owner's drawing account will flow into the statement of owner's equity.

Two common classifications of liabilities are:

current liabilities and long-term liabilities.

Which if the following is NOT true about closing entries?

Closing entries are an optional step in the accounting cycle.

an asset's accumulated depreciation account is an example of a...

contra asset

Which of the following is NOT true regarding the current ratio?

It is computed as current assets less current liabilities.

long-term liabilities

Liabilities that usually will not be due for more than one year.

temporary (nominal) accounts

Accounts that report amounts for only one period.

income summary

An account to which the revenue and expense account balances are transferred at the end of a period.

clearing account

Another name for the income summary account because it has the effect of clearing the revenue and expense accounts of their balances.

Two common classifications of assets are:

current assets and property, plant, and equipment.

the difference between the cost of a fixed asset account and its related accumulated depreciation account is referred to as the asset's...

book value

the accounting basis under which revenues are reported in the period in which cash is paid is called the...

cash basis of accounting

When there is a net loss, the entry to close Income Summary will include a:

debit to the owner's capital account.

A business with highly seasonal operations may adopt a fiscal year that:

ends when business activities have reached their lowest point in its operating cycle.

notes recievable

A customer's written promise to pay an amount and possibly interest at an agreed-upon rate.

natural business year

A fiscal year that ends when business activities have reached the lowest point in an annual operating cycle.

current assets

Cash and other assets that are expected to be converted to cash or sold or used up, usually within one year or less, through the normal operations of the business.

In the sequence of accounting cycle steps, which step follows the preparation of the adjusted trial balance?

Financial statements are prepared.

current liabilities

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets.

fixed assets (plant assets)

Longterm or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.

closing entries

The entries that transfer the balances of the revenue, expense, and drawing accounts to the owner's capital account.

closing the books

The process of transferring temporary accounts balances to permanent accounts at the end of the accounting period.

accounting cycle

The process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.

closing process

The transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to Income Summary, transferring the income summary account balance to the retained earnings account, and transferring the dividends account to the retained earnings account.

The process that begins with analyzing and journalizing transactions is called the:

accounting cycle.

expenses that have been incurred but have not been recorded in the accounts are called...

accrued expenses

the process of recording expenses in the same period that revenues are recognized is an example of the application of the...

matching concept

Payments received that have been initially recorded as liabilities but are expected to become revenues over time or through normal operations of the business are called...

unearned revenue