Accounting test number 2
A work sheet is
tool for the end-of-period process
A contra-asset account is an offsetting or opposite account and should be deducted from the related asset account.
true
A net loss occurs when the work sheet income statement debit column is greater than the credit column.
true
Accrued salaries represent salaries earned by employees but not paid as of the last day of the accounting cycle
true
Accrued wages are wages that have been earned but have not yet been paid.
true
Accumulated Depreciation has a normal credit balance
true
Adjusting entries are prepared from the adjustments columns of the work sheet.
true
Adjustments show increases or decreases to accounts and are made at the end of the accounting period to show actual balances and to match expenses with revenues.
true
After posting the adjusting entries, the balances in ledger accounts are now the same as those shown in the Adjusted Trial Balance columns of the work sheet.
true
After the closing process is complete, only permanent accounts will have balances.
true
An adjusting entry for accrued wages will result in a liability account (Salaries Payable) having a balance that carries forward to the next accounting period.
true
An adjusting entry is a general journal entry to record end-of-period adjustments to an account.
true
Closing entries are entered in the general journal immediately below the adjusting entries under the heading "Closing Entries."
true
Immediately after journalizing and posting adjusting entries, all temporary owner's equity accounts are closed.
true
Reversing entries are prepared on the first day of the new accounting period.
true
Reversing entries are used to eliminate balances in asset or liability accounts so that entries made in future accounting periods will be correct without considering balances caused by adjusting entries.
true
Temporary accounts are used to record revenue and expenses and are closed at the end of the accounting period.
true
The account Income Summary is closed during the closing process.
true
The final closing entry is to close the owner's drawing account.
true
The first step in the closing process is to close the revenue account(s).
true
The post-closing trail balance ensures that the accounting equation is in balance at the beginning of the new accounting period.
true
The post-closing trial balance is dated as of the last day of the accounting period.
true
The statement of owner's equity shows the ending balance in the capital account for the period.
true
The trial balance columns of the work sheet must be totaled and corrected, if there are errors, before continuing.
true
To "close out" is to remove balances from accounts.
true
Under Modified Accrual accounting, revenue and expenses are recognized only when cash is received or paid.
true
When adjustments are not recorded, net income is either understated or overstated.
true
When closing entries are posted to ledger accounts, temporary accounts will have a zero balance.
true
When the account Income Summary is credited to close it, there is a net loss.
true
Which of these accounts will have a zero balance after closing entries are posted?
wages expense
A work sheet is used by accountants at the beginning of an accounting period to ensure all accounts are still in balance
False
Which of these accounts will not have a zero balance after closing entries are posted?
J. Smith, capital
Interim financial statements are statements covering less than a year.
True
The accounting cycle is the term used to describe the steps involved in accounting for all business activities during a time period.
True
Which of these is a current liability?
accounts payable
All asset and liability accounts, along with the capital and drawing accounts, are extended to which columns of the work sheet?
balance sheet
Assets, liabilities, and owner's equity are listed on which financial statement?
balance sheet
The owner's drawing account would be extended to which columns of the work sheet?
balance sheet
Which of these is a long-term asset?
building
When the account Income Summary is closed, which account receives the balance?
capital account
When a revenue account is closed, it is:
debited
Which of these accounts is not listed on a formal balance sheet?
drawing account
A credit balance in the account Income Summary indicates there is a net loss for the period.
false
A net loss occurs when the work sheet income statement credit column is greater than the debit column.
false
Account numbers are entered in the posting reference column of the journal as the adjusting entries are journalized.
false
After adjusting entries are posted to general ledger accounts, it is not necessary to compute new account balances.
false
Book value represents the depreciable cost of an asset, less the year's depreciation expense.
false
Current liabilities are debts that will be paid in one year or longer.
false
Each account listed on the income statement and on the balance sheet is a temporary account.
false
Income Statement accounts that received balances in the adjusting entries are not closed in the closing entries.
false
Once revenue and expense accounts are closed to the account Income Summary, the difference-called net income or net loss-is closed to the drawing account.
false
Reversing entries must be used in order to ensure that the same expenses are not recognized in two accounting periods.
false
The account Income Summary is a permanent owner's equity account with an ongoing balance.
false
The post-closing trial balance is a formal financial statement.
false
The post-closing trial balance is a listing of all temporary and permanent accounts and their balances at the end of the accounting period.
false
To close the owner's drawing account, a debit to the drawing account is required.
false
When reversing entries are not used, there is an error because duplication will occur automatically.
false
When the closing process is complete, the account Income Summary will have a credit balance.
false
Adjusting entries are prepared:
from worksheet
All revenue and expense accounts appear in which columns of the work sheet?
income statement
Professional Fees would be extended to which columns of the work sheet?
income statement
The fourth pair of columns in the work sheet are which columns?
income statement
The income statement is prepared from which columns of the work sheet?
income statement
Which financial statement is prepared first?
income statement
Which of these is a temporary account?
insurance expense
The work sheet lists all accounts in the general ledger that have a balance or will soon have a balance after adjustments are entered.
True
The adjustment to enter salaries earned but not yet paid is called:
accrual
When an expense is incurred but not yet paid, or revenue is earned but not yet received, this is known as a(n):
accrual
Which of these is a contra-asset account?
accumulated
Which of these is a permanent account?
accumulated depreciated-equipment
Book value is original cost minus:
accumulated depreciation
When depreciation on office equipment is entered as an adjusting entry, which of these accounts is credited?
accumulated depreciation
A reversing entry is used to reverse which of the following?
adjusting entry
Which of these accounts is a permanent account?
cash
Which of these is a current asset?
cash
Which of these is a permanent account?
cash
A decimal number (such as 141.1) is used to indicate which type of account?
contra-asset
Detailed explanations are required for adjusting entries in the general journal.
false
Estimated salvage value is a precise and calculated amount that an asset will be worth at the end of its useful life
false
On the income statement, expenses are listed chronologically by account order.
false
Owner's withdrawals are found in the balance sheet credit column.
false
The account Cash will appear in the income statement columns of the work sheet.
false
The balance sheet is a formal listing of the assets, revenues, and liabilities of the business.
false
The third pair of columns in a 10-column work sheet is called the income statement.
false
The work sheet is a financial statement and is prepared in pen.
false
There is a source document, such as a receipt, to evidence each adjusting entry that is needed at the end of the month.
false
When Depreciation Expense is debited, the asset account, such as Automobile, is credited in the adjusting entry.
false
Statements prepared for less than one year are called:
interim financial statement
Adjusting entries are used to fulfill which accounting concept?
matching
Which of these accounts is a temporary account?
miscellaneous
Every adjusting entry has an effect on:
net income
There is a net increase in capital when:
net income exceeds owner's withdrawal
If the debit column of the income statement columns is greater than the credit column, the result is a called a:
net loss
When Income Summary has a debit balance after revenue and expense accounts are closed,
net loss
Which of these accounts would show a debit balance in the trial balance columns of the work sheet?
office supplies
Income Summary is which type of account?
owner's equity
When expired insurance is entered as an adjusting entry at the end of the accounting period, which of these accounts is credited?
prepaid insurance
Adjusting entries:
prepared at the end of the accounting period
Which of these is prepared at the end of the accounting period?
preparing the work sheet
The post-closing trial balance lists all but which of the following?
revenue
Which type of account is closed first in the closing process?
revenue
When a reversing entry is not used for accrued wages, which accounts must be debited when wages are paid the following accounting period?
salaries expense and salaries payable
Which of these adjusting entries would be subject to using a reversing entry?
salaries expense, salaries payable
Which of these accounts represents an accrued expense?
salaries payable
When supplies used up are recorded as an adjustment, which of these accounts is credited?
supplies
In the adjusting entry for the amount of supplies used at the end of the month, which account is debited?
supplies expense
Closing entries are used to close which type of accounts?
temporary
Accumulated Depreciation is a contra-asset account.
true
Adjusted trial balance columns are totaled to prove the equality of debits and credits.
true
Adjusting entries are entered in the general journal under the heading "Adjusting Entries."
true
Adjusting entries are used to comply with the matching concept.
true
Adjustments are increases or decreases to accounts that are indicated on the work sheet at the end of the period.
true
Current assets are those that will be used up with the year or the accounting period, whichever is longer.
true
Every adjusting entry has an effect on net income.
true
Everything the accountant needs to prepare the income statement appears in the income statement columns of the work sheet.
true
Land, building, and automobiles are examples of long-term assets.
true
Liquidity relates to how quickly current assets can be converted into cash or used up as an expense.
true
Month end adjusting entries appear in the general journal immediately following the month's journal entries for transactions.
true
The adjustments debit account shows the amount to be debited to an account in the adjusting entries.
true
The difference between the balance sheet debit and credit columns of the work sheet represents net income or net loss.
true
The difference between the income statement debit and credit columns of the work sheet represents net income or net loss
true
The ending owner's capital as of the end of the period will be used on the balance sheet.
true
The income statement is considered to be one of the most important financial statements.
true
The owner's drawing account will appear in the balance sheet columns of the work sheet.
true
The statement of owner's equity is the connecting link between the income statement and the balance sheet.
true
The word "adjusting" should appear in the item column of general ledger accounts when adjusting entries are posted.
true
When net income exceeds owner's withdrawals, there is a net increase in capital for the period.
true
When owner's withdrawals exceed net income, there is a net decrease in capital for the period.
true
