chapter 4 accounting 101

Which of the statements below describe(s) a temporary account? (Check all that apply.)

A temporary account is closed at the end of an accounting period. A temporary account has a balance for only one period.

The steps in the closing process are listed on the right. Match them to the correct order in which they would be performed (on the left).

Step #1 Identify accounts to be closed. Step #2Journalize and post closing entries Step #3 Prepare a post closing trial balance..

The Supplies account in the Unadjusted Trial Balance columns has a debit balance of $4,000. There is a $1,500 credit adjustment in the Adjustments columns across from the Supplies account. Describe how to compute the Supplies account balance on the Adjusted Trial Balance.

The $1,500 credit adjustment would be subtracted from the $4,000 debit balance in the Unadjusted Trial Balance.

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 Withdrawal's account balance will be used in preparing the statement of owner's equity.

Describe the general ledger after adjusting and closing entries have been posted. (Check all that apply.)

The abbreviations "adj." and "clos." have been entered in the explanation columns of the ledger. The Owner, Withdrawal account will have a $0 balance after closing. All expense accounts will show a $0 balance after closing. The Income Summary account will show three closing entries.

Which of the statements below explains the accounting cycle?

The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements.

Which of the statements below is (are) correct regarding the accounting cycle? (Check all that apply.)

The accounting cycle refers to steps followed by a company to prepare its financial statements. The accounting cycle is a series of steps repeated each reporting period. The accounting cycle contains 10 steps. The cycle contains steps for adjusting and closing accounts.

Explain how to add adjustments to a work sheet when more than one adjustment is required: (Check all that apply.)

The adjustment can be combined into one adjustment amount. The adjustment can be squeezed in on one line of the trial balance. The adjustment can be added to a blank line.

Which of the following lists contains only temporary accounts?

Wages Expense; Income Summary; Owner, Withdrawals

Explain the required steps to complete a work sheet by placing the following in the correct order of completion. (Put the first step at the top.)

1- enter adjusted trial balance 2- enter adjustments 3- prepare adjusted trial balance 4- sort adjusted trial balance amounts to financial statements 5-total financial statement columns

How can you add multiple adjustments to one account in a work sheet?

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

Which of the statements below describe(s) a permanent account? (Check all that apply.)

A permanent account's balance is carried forward to the next accounting period. A permanent account is reported on the balance sheet.

Which of the following statements correctly describes what a work sheet is? (Check all that apply.)

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. A work sheet helps to organize financial data.

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.

The Income Summary account can be defined as which of the following? (Check all that apply.)

An account whose balance equals net income or net loss An account used during the closing process A temporary account An account that contains a credit for the sum of all revenues

A classified balance sheet can be described as a balance sheet that: (Check all that apply.)

B) Lists current assets in order of how quickly they can be converted into cash. C) Is more useful to decision makers E) Organizes assets and liabilities into important subgroups

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet. (Check all that apply.)

Bonds payable (due in five years) Mortgage payable

Describe your understanding of the closing process by identifying the correct steps below. (Check all that apply.)

Close all revenue accounts. Close the Withdrawals account. Close all expense accounts. Close the Income Summary account.

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.

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. Current liabilities are reported in the order of those to be settled first.

which of the following is correct reguarding a work sheet?

Each set of column totals must balance on the Trial Balance columns, Adjustments columns and the Adjusted Trial Balance columns.

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. (Check all that apply.)

Expense accounts go to the Income Statement Debit column. Owner, Withdrawals go to the Balance Sheet & Statement of Owner's Equity Debit column. Liabilities go to the Balance Sheet & Statement of Owner's Equity Credit column.

Identify the accounts below that would be classified as intangible assets on a classified balance sheet. (Check all that apply.)

Franchise Trademark Goodwill Patent Copyrights

Which of the following statements is (are) correct about completing a work sheet? (Check all that apply.)

If a net income occurs, it is added to the Debit column of the Income Statement. 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 net income occurs, it is added to the Credit column of the Balance Sheet. If a loss occurs, it is added to the Debit column of the Balance Sheet.

Define the Income Summary account.

It is a temporary account used during the closing process to summarize revenues and expenses.

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

Keying notations

What defines a long-term investment? (Check all that apply.)

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

Identify the accounts below that would be classified as a long-term investment. (Check all that apply.)

Notes receivable due in 2 years Investments in bonds Land held for future expansion

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.)

Owner, Capital is a permanent account, but Owner, Withdrawals is a temporary account. Permanent accounts will appear on a post-closing trial balance. Temporary accounts have a balance for one period only. Permanent accounts are reported on the balance sheet. Most temporary accounts are reported on the income statement.

Define plant assets by selecting the correct statements below. (Check all that apply.)

Plant assets are equipment and other assets that have a life greater than one year. Plant assets are property, plant and equipment that are tangible. Plant assets are difficult to convert to cash quickly. Concept Resources

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. (Check all that apply.)

The current ratio can affect interest rates charged by creditors when lending money to a business. 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 would have a problem paying off short term debt.

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.

In preparing a post-closing trial balance, which of the following statements are correct? (Check all that apply.)

The total of all debit balances will equal the total of all credit balances. All permanent accounts with a balance in the general ledger will be included. The capital account on the post-closing trial balance will include the net income or net loss for the period.

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.

Identify which of the accounts below would be classified as a current asset. (Check all that apply.)

accounts receivable cash office supplies prepaid rent

The Input Field 1 of 2 adjusted unavailable correct (adjusted/unadjusted) trial balance is prepared by combining the adjustments in the Adjustments columns with the balances for each account listed on the Input Field 2 of 2 unadjusted unavailable correct (adjusted/unadjusted) trial balance.

adjusted, unadjusted

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).

adjustments, balance

when does the closing process take place

at the beginning of an accounting period

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

Accounting for salaries expense without using a reversing entry requires the following on the date of payment:

compound entry that debits the expense and liability accounts and credits cash

Summarize the closing process by listing the closing entries in the order in which they would occur at the end of the accounting period. Step 1: Close Income Statement (credit/debit) balance accounts. Step 2: Close Income Statement (credit/debit) balance accounts. Step 3: Close (income summary/withdrawals) . Step 4: Close (income summary/withdrawals) .

credit, debit, income summary, withdrawals

the journal entry to close all of a companys expense accounts would include a ____ to each of the expense accounts and a corresponding ______ to the income _______ account

credit, debit, summary

The income summary account it___ for the sum of all revenue accounts and is ______ for the sum of all expense accounts and it is balance will be transferred to the ____ account

credited, debited, 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.

end, adjusted, after

Select the statement(s) below which correctly describe how to use the work sheet in the adjustment process. (Check all that apply.)

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.

equity is the ________ claim on the assets of a buisness. Ina proprietorship, this claim is reported in the______ section on a balace sheet in the _________ account

owner's, equity, capital

Complete the following sentence about the benefits of using a work sheet. A work sheet is a helpful tool which may be used to help prepare financial (statements/reports). It is constructed at the (beginning/end) of an accounting period before the adjusting process. All adjustments can easily be seen in the (adjustments/unadjusted) trial balance columns and then an (adjusted/unadjusted) trial balance can be prepared.

statements, end, adjustments, adjusted

Complete the following statement. The purpose of the closing process is to reset Input Field 1 of 2 temporary unavailable correct temporary (temporary/permanent) account balances to zero and to transfer the changes in all of these accounts to the Owner, Input Field 2 of 2 capital unavailable correct capital (Capital/Summary/Withdrawal) account.

temporary, capital

Closing means to transfer account balances from I (asset/liability/permanent/temporary) accounts so that they will start with a (contra/larger/zero) balance at the beginning of the next period.

temporary, zero

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.)

the closing process resets the balances in temporary accounts to zero. the closing process helps to summarize a period's revenues and expenses.