acc1. 04: Completing the Accounting Cycle
The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash is called the: A) production time. B) operating cycle. C) accounting cycle. D) sales time.
Answer: B
A balance sheet that lists the assets above the liabilities and owner's equity sections is a(n): A) report form balance sheet. B) unclassified form balance sheet. C) account form balance sheet. D) audited form balance sheet.
Answer: A
Liquidity is a measure of how: A) quickly an asset may be converted into cash. B) long an asset can be used. C) easily an asset can be exchanged for another asset. D) short an operating cycle is.
Answer: A
The assets that will not be converted to cash or used up within the business's operating cycle or one year, whichever is greater, are called: A) long-term assets. B) long-term liabilities. C) current assets. D) current liabilities.
Answer: A
The entries that transfer the revenue, expense, and withdrawal balances to the Owner's Name, Capital account to set these balances to zero for the next period are called: A) closing entries. B) opening entries. C) adjusting entries. D) temporary accounts.
Answer: A
The financial statements are prepared from the: A) adjusted trial balance. B) chart of accounts. C) statement of owner's equity. D) unadjusted trial balance.
Answer: A
Under which of the following categories would Accounts Receivable appear? A) Current assets B) Current liabilities C) Long-term assets D) Long-term liabilities
Answer: A
Which of the following account's balance is carried forward to the next accounting period? A) Accumulated Depreciation B) Depreciation Expense C) Owner's Name, Withdrawals D) Sales Revenue
Answer: A
Which of the following accounts will be closed by crediting the Income Summary account? A) Service Revenue B) Depreciation Expense C) Accounts Payable D) Accumulated Depreciation
Answer: A
Which of the following is a plant asset? A) Equipment B) Patents C) Trademark D) Accounts Receivable
Answer: A
Buildings, land, and equipment are classified as: A) current assets. B) long-term assets. C) current liabilities. D) long-term liabilities.
Answer: B
In which of the columns of the worksheet would a net loss be found? A) In the balance sheet credit column and the income statement debit column B) In the balance sheet debit column and the income statement credit column C) In the trial balance credit column, the adjusted trial balance credit column and the balance sheet credit column D) In the trial balance debit column, the adjusted trial balance debit column and the balance sheet debit column
Answer: B
Property, plant and equipment are categorized as: A) current assets. B) fixed assets. C) long-term investments. D) short-term investments.
Answer: B
Revenues and expenses are transferred to the ________ account before their final transfer into the Owner's Name, Capital account. A) net income. B) income summary C) withdrawals D) assets
Answer: B
Which is a permanent account? A) Wages Expense B) Salary Payable C) Service Revenue D) Utilities Expense
Answer: B
Which of the following entries will be necessary to close the appropriate depreciation account at the end of the year? A) Debit Accumulated Depreciation and credit Income Summary B) Debit Depreciation Expense and credit Income Summary C) Debit Income Summary and credit Accumulated Depreciation D) Debit Income Summary and credit Depreciation Expense
Answer: D
Which of the following is an example of an intangible asset? A) Equipment B) Plant C) Property D) Copyright
Answer: D
The adjusting process zeroes out all revenues and all expenses.
Answer: FALSE
The amount of the Owner's Name, Withdrawals account is entered in the income statement columns on the worksheet.
Answer: FALSE
The last two columns generally found on the right side of the worksheet are the income statement columns.
Answer: FALSE
The permanent accounts—assets, liabilities, and capital—are closed to the Owner's Name, Capital account.
Answer: FALSE
The post-closing trial balance shows the net income for the period just ended.
Answer: FALSE
In the balance sheet, assets are classified as either current or long-term depending on their liquidity.
Answer: TRUE
In the last step of the closing process, the Owner's Name, Withdrawals account is closed to the Owner's Name, Capital account.
Answer: TRUE
In the worksheet, the adjusted balance in the Service Revenue account is also recorded in the credit column of the income statement.
Answer: TRUE
Net income (loss) is the difference between the total debits and the total credits in the income statement columns of the worksheet.
Answer: TRUE
Permanent accounts are not closed at the end of the accounting period.
Answer: TRUE
The Cash account is a temporary account.
Answer: FALSE
Under which of the following categories would bonds held as investment for more than a year appear? A) Long-term assets B) Current assets C) Long-term liabilities D) Current liabilities
Answer: A
Which of the following accounts has a balance equal to Net Income immediately before it is closed? A) Income Summary B) Owner's Name, Withdrawals C) Net Income D) Owner's Name, Capital
Answer: A
Which of the following accounts will be closed by debiting the Income Summary account? A) Depreciation Expense B) Accounts Payable C) Service Revenue D) Accumulated Depreciation
Answer: A
Which of the following accounts will be included in a post-closing trial balance? A) Accumulated Depreciation—Building B) Rent Expense C) Interest Expense D) Service Revenue
Answer: A
Which of the following accounts would appear in the income statement credit column? A) Service Revenue B) Prepaid Insurance C) Unearned Service Revenue D) Depreciation Expense
Answer: A
Which of the following statements is true if the income statement credit column exceeds the income statement debit column on a worksheet? A) The company has a net income. B) The company has a net loss. C) The capital account decreased during the period. D) The total liabilities exceed total assets.
Answer: A
Which of the following statements is true if the income statement debit column exceeds the income statement credit column on a worksheet? A) The company has a net loss. B) The capital account increased during the period. C) The company has net income. D) The liabilities are greater than assets.
Answer: A
The assets which do not have a physical form are called: A) current assets. B) intangible assets. C) long-term investments. D) mortgaged investments.
Answer: B
The worksheet helps accountants to: A) make the adjusted trial balance. B) prepare the financial statements. C) prepare the unadjusted trial balance. D) maintain books of accounts without a journal.
Answer: B
Where does Net Income appear on a worksheet? A) Net income appears only in the income statement debit column. B) Net income appears in the balance sheet credit column and in the income statement debit column. C) Net income appears in the income statement credit column and in the balance sheet debit column. D) Net income appears only in the balance sheet credit column.
Answer: B
Which of the following accounts will be included in a post-closing trial balance? A) Service Revenue B) Interest Payable C) Interest Expense D) Utilities Expense
Answer: B
Which of the following categories of accounts are temporary accounts that are closed at the end of the year? A) Assets, liabilities and withdrawals B) Revenues, expenses and withdrawals C) Assets, liabilities and capital D) Revenues, expenses and capital
Answer: B
Which of the following statements is true of the worksheet? A) The worksheet is a ledger. B) The worksheet is a document used to summarize data to prepare the financial statements. C) The worksheet is a financial statement issued to the public to communicate the financial results of the company. D) The worksheet is a journal.
Answer: B
Which of the following would be considered a long-term asset? A) Accounts Payable B) Land C) Cash D) Owner's Name, Capital
Answer: B
A list of the accounts and their balances at the end of the period after journalizing and posting the closing entries which includes only permanent accounts is called: A) chart of accounts. B) adjusted trial balance. C) post-closing trial balance. D) pre-closing balance sheet.
Answer: C
An account that is not closed at the end of the period is called a(n): A) expense account. B) temporary account. C) permanent account. D) revenue entry.
Answer: C
Assets are listed in the order of their ________ on the balance sheet. A) amounts B) dates of purchase C) liquidities D) durabilities
Answer: C
Salaries Payable, Interest Payable, and Unearned Revenue are examples of: A) short-term investments. B) fixed assets. C) current liabilities. D) long-term liabilities.
Answer: C
The Interest Expense in the worksheet's unadjusted trial balance column is $3,000. Interest Expense in the income statement column is $7,000. Which of the following entries would have caused this difference? A) A $7,000 credit to Interest Expense in the worksheet's adjustments column B) A $7,000 credit to Interest Payable in the worksheet's adjustments column C) A $4,000 debit to Interest Expense in the worksheet's adjustments column D) A $4,000 credit to Interest Expense in the worksheet's adjustments column
Answer: C
The Notes Payable that are due within two years are classified as: A) current liabilities. B) current assets. C) long-term liabilities. D) long-term assets.
Answer: C
The Prepaid Rent in the worksheet's unadjusted trial balance column is $4,000. Prepaid Rent in the balance sheet column is $2,000. Which of the following entries would have caused this difference? A) A $2,000 debit entry to Prepaid Rent in the worksheet's adjustments column B) A $2,000 credit entry to Rent Expense in the worksheet's adjustments column C) A $2,000 credit entry to Prepaid Rent in the worksheet's adjustments column D) A $2,000 debit entry to Cash in the worksheet's adjustments column
Answer: C
The financial statement that reports assets, liabilities, and owner's equity as of the last day of the period is called the: A) income statement. B) statement of owner's equity. C) balance sheet. D) unadjusted trial balance.
Answer: C
To which of the following accounts should the balance in the Income Summary account be closed? A) Owner's Name, Withdrawals B) Net Income C) Owner's Name, Capital D) Service Revenue
Answer: C
Under which of the following categories would bonds held as investment for more than a year appear? A) Current assets B) Long-term liabilities C) Long-term assets D) Current liabilities
Answer: C
Which of the following accounts will have an ending balance after the closing process is completed? A) Owner's Name, Withdrawals B) Rent Expense C) Accumulated Depreciation—Furniture D) Service Revenue
Answer: C
Which of the following accounts would appear in the balance sheet credit column? A) Prepaid Insurance B) Buildings C) Unearned Service Revenue D) Service Revenue
Answer: C
Which of the following accounts would appear in the income statement debit column? A) Unearned Service Revenue B) Service Revenue C) Depreciation Expense D) Prepaid Insurance
Answer: C
Which of the following adjusted balances would appear in the balance sheet credit column of a worksheet? A) Rent Revenue B) Insurance Expense C) Salaries Payable D) Equipment
Answer: C
Which of the following is the measure of how quickly an item can be converted to cash? A) Debt ratio B) Current ratio C) Liquidity D) Accounting cycle
Answer: C
Which of the following statements explains a classified balance sheet? A) Accounts are classified by their purchase dates. B) Account balances are listed from the highest amount to the lowest amount. C) Assets are listed in the order of their liquidity. D) Assets are listed in alphabetical order.
Answer: C
Which of the following statements is true of the worksheet? A) The Net Income is recorded in the income statement credit column. B) The Net Income is recorded in the adjusted trial balance debit column. C) The Net Income is recorded in the income statement debit column. D) The Net Income is recorded in the balance sheet debit column.
Answer: C
In which of the columns of the worksheet would Net Income be found? A) Under the trial balance credit column, the adjusted trial balance credit column and the balance sheet credit column B) Under the trial balance debit column, the adjusted trial balance debit column and the balance sheet debit column C) Under the balance sheet debit column and the income statement credit column D) Under the balance sheet credit column and the income statement debit column
Answer: D
Patents, copyrights, and trademarks are examples of: A) short-term investments. B) fixed assets. C) long-term investments. D) intangible assets.
Answer: D
The 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. A) intangible B) plant C) long-term D) current
Answer: D
Under which of the following categories would Accounts Payable appear? A) Long-term assets B) Current assets C) Long-term liabilities D) Current liabilities
Answer: D
What is the result if the amount of Net Income for the year is less than the amount of the Owner's Withdrawals? A) Owner's Name, Capital increases B) Cash balance decreases C) Cash balance increases D) Owner's Name, Capital decreases
Answer: D
Which of the following accounts are included in an income statement? A) Land, Salaries Payable B) Owner's Name, Capital, Owner's Contribution C) Furniture, Cash D) Service Revenue, Utilities Expense
Answer: D
Which of the following accounts will be closed by debiting the Income Summary account? A) Owner's Name, Capital B) Service Revenue C) Accounts Receivable D) Salaries Expense
Answer: D
Which of the following accounts will be included in a post-closing trial balance? A) Service Revenue B) Rent Expense C) Interest Expense D) Unearned Service Revenue
Answer: D
Which of the following accounts would appear in the balance sheet debit column? A) Unearned Service Revenue B) Accumulated Depreciation C) Service Revenue D) Prepaid Insurance
Answer: D
Which of the following are NOT included in a post-closing trial balance? A) Assets and liabilities B) Capital and assets C) Capital and liabilities D) Revenues and expenses
Answer: D
Which of the following assets is the most liquid? A) Building B) Prepaid Expenses C) Accounts Receivable D) Cash
Answer: D
Which of the following entries will be necessary to close the Insurance Expense account at the end of the year? A) Debit Insurance Expense and credit Income Summary B) Debit Insurance Expense and credit Owner's Name, Capital C) Debit Owner's Name, Capital and credit Insurance Expense D) Debit Income Summary and credit Insurance Expense
Answer: D
Which of the following is a current asset that is expected to be converted to cash, sold, or consumed during the next year (or the normal operating cycle, if longer)? A) Land B) Equipment C) Building D) Accounts Receivable
Answer: D
Which of the following is true of a completed worksheet? A) The total debits in the trial balance column equal the total debits in the adjusted trial balance column. B) The total debits in the income statement column equal the total credits in the balance sheet column. C) The total debits in the income statement column equal the total debits in the balance sheet column. D) The total debits equal the total credits in each column.
Answer: D
Rose Company earned revenues of $15,000 and incurred expenses of $9,000. The withdrawals of Mary Rose, the owner, were $3,000. What is the balance in the Income Summary account after closing Net Income or loss to the Rose, Capital account? A) Debit balance of $15,000 B) Credit balance of $9,000 C) Credit balance of $6,000 D) Balance of $0
Answer: D Explanation: D) Net Income will be transferred to Owner's Name, Capital account, that is, Rose, Capital account. The balance in the Income Summary account after closing Net Income or loss is $0.
A balance sheet prepared in the account form lists the assets at the top and the liabilities and owner's equity below.
Answer: FALSE
A balance sheet prepared in the report form lists the assets on the left, and the liabilities and owner's equity on the right.
Answer: FALSE
As a part of the closing process, revenues and expenses are closed to a temporary account called the Net Income (loss) account.
Answer: FALSE
Asset and liability accounts are closed to the Income Summary account.
Answer: FALSE
GAAP requires publicly traded companies to prepare a post-closing trial balance and publish it in their annual report.
Answer: FALSE
Only temporary accounts appear on the post-closing trial balance.
Answer: FALSE
Prepaid Rent is always classified as a long-term asset.
Answer: FALSE
The Accounts Payable account is a temporary account.
Answer: FALSE
The Office Supplies account is a temporary account.
Answer: FALSE
The Owner's Name, Capital account is a temporary account.
Answer: FALSE
The Owner's Name, Withdrawals account is a permanent account.
Answer: FALSE
The Service Revenue account is a permanent account.
Answer: FALSE
The operating cycle is the time span required for a business to repay its long-term liabilities.
Answer: FALSE
Net income is entered as the balancing amount on the debit side of the income statement columns and the credit side of the balance sheet columns of the worksheet.
Answer: TRUE
Only permanent accounts appear on the post-closing trial balance.
Answer: TRUE
Revenue and expense accounts are closed to the Income Summary account.
Answer: TRUE
The Accounts Receivable account is a permanent account.
Answer: TRUE
The Accumulated Depreciation account is a permanent account.
Answer: TRUE
The Depreciation Expense account is a temporary account.
Answer: TRUE
The Office Supplies Expense account is a temporary account.
Answer: TRUE
The Owner's Name, Capital account is a permanent account.
Answer: TRUE
The Salaries Expense account is a temporary account.
Answer: TRUE
The Salaries Payable account is a permanent account.
Answer: TRUE
The Service Revenue account is a temporary account.
Answer: TRUE
The closing process helps in measuring each period's net income separately from all other periods.
Answer: TRUE
The post-closing trial balance shows the updated capital balance.
Answer: TRUE
