SB CH 4
Which of the following accounts would be closed during the year-end closing process? 1. cost of goods sold 2. service revenue 3. gain on sale of land 4. merchandise inventory 5. notes payable 6. Rent expense 7 dividends payable 8 common stock
1, 2, 3, 6 * only income statement accounts and dividends are closed to retained earnings
Transactions: 1. are the starting point in the accounting process that ends with the preparation of financial statements 2. Involve the selection of alternative methods of reflecting the effects of certain accounts 3. are economic interchanges between entities
1, 3
Under Accrual account, year-end adjustments are made: 1. to ensure that revenues are recognized in the year in which they are earned 2. to ensure that expenses are recognized in the year in which they are earned 3. because the cash disbursement for expenses may occur before or after the event that causes expense recognition
1, 3
Under accrual accounting, year end adjustment are made: 1. to ensure that revenues are recognized in the year in which they are earned 2. because the cash disbursement for expenses may occur before or after the event that causes expense recognition 3. to ensure the expenses are recognized in the year in which they are earned
1,2
Under accrual accounting, year-end adjustments are made: 1. to ensure that expenses are recognized in the year in which they are incurred. 2. to ensure that revenues are recognized in the year in which they are incurred 3. because revenue receipts may occur before or after the event that causes revenue recognition
1,3
Which of the following groups of accounts would all be closed in the year-end closing process? 1. dividends, land, depreciation expense, and sale 2. interest income, cost of goods sold, dividends, and gain on sale of land 3. loss on sale of equipment, service revenue, notes payable, and rent expense 4. Wages expense, accounts receivable, sales, and dividends.
2
Stockholders' equity accounts: 1. decreases with credit entries 2. decrease with debit entries 3. increase with credit entries 4. normally have a credit balance 5. increase with debit entries
2,3,4
A = L + Paid in Capital + Retained Earnings
Beginning (retained earnings) + Revenue (during the period) - Expenses (during the period)
A = L +
SE
T/F: The key to using the horizontal model is to keep the balance sheet in balance
T
If debit equals credit, then:
assets will equal the sum of liabilities and stockholders' equity
credit entries (in regard to the accounting equation):
decrease assets and increase liability and stockholders equity accounts
When using the horizontal model for a transaction that affects both the balance sheet and the income statement, the balance sheet will balance when the:
income statement affect on stockholders' equity is considered
debit entries (in regard to accounting equation):
increase asset accounts and decrease liability and stockholders' equity accounts
Asset accounts:
increase with debit entries, decrease with credit entries, and normally have a debit balance
Transactions are initially recorded in a __________
journal
After transactions have been recorded in a journal, they are posted to a ___________.
ledger
In bookkeeping and accounting, debit means ______ and credit means ______, and nothing more.
left, right
When using the horizontal model, the arrow from net incomes to stockholders' equity indicates that:
net income affects retained earning, which is a component of stockholders' equity
Net income from the income statement is added to the beginning of the balance of:
retained earning in the statement of changes in retained earnings
Net income from the income statement is added to the beginning balance of:
retained earnings in the statement of changes in retained earnings
Although ______ and _______ are reported on the income statement, they also impact the ending balance of retained earnings shown on the balance sheet
revenue, expense
Accounts are summarized in financial _____________ whereas ___________ are summarized in accounts
statements, transactions
