Accounting Chapter 3 and 4
Which of the following is considered a fiscal year?
12 months
The entries that transfer the revenue, expense, and dividends balances to the Retained Earnings account to prepare the company's books for the next period are called ________ entries.
closing
Which of the following entries is necessary to close the appropriate depreciation account at the end of the year?
debit Income Summary and credit Depreciation Expense
An account that is not closed at the end of the period is called a(n)
permanent account
The worksheet helps accountants to
prepare the financial statements
Revenue is earned when
the business satisfies each performance obligation
Which of the following statements is true of accrual basis accounting?
Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP).
The entry to record depreciation includes a credit to the ________ account.
Accumulated Depreciation
Which of the following is a contra account?
Accumulated Depreciation
Regarding a classified balance sheet, which of the following statements is correct?
Assets are listed in the order of their liquidity.
Which financial statement is prepared last?
Balance sheet
A depreciable asset's cost minus accumulated depreciation is called _
Book value
Which of the following accounts would appear in the income statement debit column of the worksheet?
Depreciation Expense
The entry to record depreciation includes a debit to the ________ account.
Depreciation expense
Revenues and expenses may be transferred to the ________ account before their final transfer into the Retained Earnings account.
Income summary
Which of the following accounts will be closed by crediting the Income Summary account?
Service Revenue
Which of the following accounts would appear in the income statement credit column of the worksheet?
Service Revenue
Which of the following statements is true if the income statement debit column exceeds the income statement credit column of a worksheet?
The company incurred a net loss.
The current ratio measures a company's
ability to pay current liabilities from current assets
The process by which companies produce their financial statements for a specific period is called the
accounting cycle
An adjusting entry that credits Salaries Payable is an example of a(n)
accrued expense
Employees earned $600 in salaries that will be paid May 2.
accrued expense
Work performed but not yet billed to customer, $500
accrued revenue
The sum of all the depreciation expense recorded to date for a depreciable asset is called __
accumulated depreciation
Which of the following account's balance is carried forward to the next accounting period?
accumulated depreciation
The financial statements are prepared from the
adjusted trial balance
Closing entries are journalized and posted __
after preparing the financial statements
An adjusting entry is completed
at the end of the accounting period
The financial statement that reports assets, liabilities, and stockholders' equity as of the last day of the period is called the
balance sheet
What is the term used for the difference between the Equipment account and the Accumulated Depreciationminus Equipment account?
book value
Which of the following is the most liquid asset?
cash
Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year, are called ________ assets.
current
Salaries Payable, Accounts Payable, and Unearned Revenue are examples of
current liabilities
Advance cash payments of future expenses are called _
deferred expense
Paid six months of rent
deferred expense
Purchased $300 of office supplies on account.
deferred expense
Purchased a computer for $1,000.
deferred expense
Received $1,200 from customer for six month service contract that began April 1.
deferred revenue
The liability created when a business collects cash from its customers before completing a service or delivering a product is called
deferred revenue
The matching principle is also called the
expense recognition principle
Which of the following accounts will be included in a postminusclosing trial balance?
interest payable
In an accounting cycle, which of the following steps takes place only at the end of the accounting period?
journalize adjusting entries
Which of the following would be considered a longminusterm asset?
land
The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle.
matching
Adjusting entries are needed to correctly measure the
net income (loss) on the income statement
To which of the following accounts should the balance in the Income Summary account be closed?
retained earnings
Which of the following accounts will be closed by debiting the Income Summary account?
salaries expense
Which of the following accounting terms assumes that a business's activities can be divided into small segments and that financial statements can be prepared for specific periods, such as a month, quarter, or year?
time period concept
Which of the following is not a type of adjusting entry?
unearned expenses
Which of the following accounts will be included in a postminusclosing trial balance?
unearned revenue
An internal document that helps summarize data for the preparation of financial statements is called a
worksheet
Which of the following are temporary accounts that are closed at the end of the year?
revenues, expenses, and dividends
