Unit 7

9 accounting cycle steps

1.analyze business transactions 2.make general journal 3.make general ledger 4.make trial balance 5.make adjusted journal and adjusted ledger 6.make adjusted trial balance 7.prepare financial statements 8.male closing journal and closing ledger 9.make post-closing trial balance

worksheets done for 2 optional steps of a outing cycle:

1.make adjusted journal and adjusted ledger 2.make financial statements (all except cash flow statement)

optional worksheet creation steps

1.make trial balance on 2.add adjusted entries 3.make adjusted trial balance in 4.make financial statement columns from adjusted trial balance on 5.find net income or net loss

"___entriesproduce a zero balance in each temporary account. The temporary accounts are then ready to accumulate data in the next accounting period separate from the data of prior periods. Permanent accounts are not closed."

Closing

companies generally journalize and post closing entries only at the end of the___period all temporary accounts will contain data for___year

annual accounting 1 fiscal

current asset

asset that business expects to convert to cash or use up within one year or its operating cycle, whichever is longer

operating cycle

average time that it takes to purchase inventory, sell it on account, and then collect cash from customers

end of the accounting period, the company makes the accounts ready for the next period and distinguishes permanent and temporary accounts, called

closing the books

___record stockholders' investments in the company by debiting an asset account and crediting the___account and income retained goes to___

corporations; common stock;retained earnings account

relationship is important in evaluating a company's liquidity—its ability to pay obligations expected to be due within the next year excess assets excess liabilities

current assets vs current liabilities likelihood for paying the liabilities is favorable likelihood for paying the liabilities is unfavorable; possible bankruptcy

obligations that the company is to pay within the coming year or its operating cycle, whichever is longer obligations that a company expects to pay after one year, regardless of operating cycle

current liability long term liability

using withdrawals, 1 can say that dividends are distributions/determinants ofnincome

distributions

classified balance sheet groups together similar assets and similar liabilities, using a number of standard classifications and sections useful because items within a group have similar? uses: (1) whether the company has enough assets to pay its debts as they come due, and (2) the claims of short- and long-term creditors on the company's total assets.

economic characteristics

in America, all businesses must choose the same date to end their fiscal years or any accounting periods? true or false

false

true or false: worksheet is formal part of accounting cycle

false

adjusting entries are prepared from the adjustments columns of the worksheet to make what?

general journal and ledger

net income or net loss for the period is the difference between the totals of the two___columns

income statement

long-lived assets that do not have physical substance yet often are very valuable

intangible assets

(1) investments in stocks and bonds of other companies that are normally held for many years, (2) long-term assets such as land or buildings that a company is not currently using in its operating activities, and (3) long-term notes receivable examples of?

long term investment

before close, income summary balance must equal?

net income or net loss for fiscal year

purpose of the post-closing trial balance is to prove the equality of the permanent account balances carried forward into the___accounting period

next annual

worksheets can be used as basis of posting to general ledgers, yes or no?

no

while closing, which accounts are 1 underlined and which are 2?

permanent;temporary

stockholder equity accounts based on economic entity

proprietorship-1 capital account partnership-1 capital account per partner corporation-1 common stock account and 1 retained earnings account

retaining earnings rise when closing____and falls when closing___

revenue and expense accounts; dividend accounts

right or wrong: businesses can have a period longer than one year to classify assets and liabilities as current because they have an operating cycle longer than one year

right

income summary

temporary holding account to collect revenue and expense balances when closing to make retained earnings account

temporary and permanent accounts

temporary: 1.revenues 2.expenses 3.dividends permanent: 1.assets 2.liabilities 3.owner's equity (common stock and retained earnings)

assets with relatively long useful lives that a company is currently using in operating the business EPP

1..equipment 2.property 3.plant

interim (usually quarterly) financial statements package in? annual? filing for SEC in US

TQ TK (annual report)

balance sheet and retained earnings statement are prepared from what worksheet columns?

balance sheet

true or false: "In preparing closing entries, companies could close each income statement account directly to Retained Earnings. However, to do so would result in excessive detail in the permanent Retained Earnings account. Instead, companies close the revenue and expense accounts to another temporary account, Income Summary, and they transfer the resulting net income or net loss from this account to Retained Earnings."

true

companies can prepare financial statements before they journalize and post adjusting entries using? why worksheets do not substitute financial statements?

worksheets different column format

dividends closed by income summary? right or wrong?

wrong

long term liabilities may have 1 summer or multiple accounts?

yes

non current asset

asset no current asset

regarding worksheets, either the income statement columns or the balance sheet columns are not equal after the net income or net loss has been entered, there is an

error(s)

true or false: "Companies record closing entries in the general journal. A center caption, Closing Entries, inserted in the journal between the last adjusting entry and the first closing entry, identifies these entries. Then the company posts the closing entries to the ledger accounts. Companies generally prepare closing entries directly from the adjusted balances in the ledger."

true