Principles Of Accounting Chapter 4

Review and complete the following statement regarding the Income Summary account. The Income Summary account is (debited/credited) for the sum of all revenue accounts and is (debited/credited) for the sum of all expense accounts and its balance will be transferred to the (Capital/Cash) account.

1. Credited 2. Debited 3. 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.

1. End 2. Adjusted 3. After

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.

Describe an unclassified balance sheet.

An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.

When does the closing process take place?

At the end of an accounting period

A post-closing trial balance is a list of (permanent/temporary) accounts and their balances from the (journal/ledger) (after/before) all (adjusting/closing) entries have been journalized and posted.

Blank 1: permanent Blank 2: ledger Blank 3: after Blank 4: closing

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

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.

Choose the statement below that explains what "closing" means.

Closing means to bring an account balance to zero.

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? (Check all that apply.)

Current liabilities are liabilities due to be paid within one year. Current liabilities are usually settled by paying out current assets such as cash. Current liabilities are reported in the order of those to be settled first.

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

Equipment Land currently being used Machinery Building

Select the statement below that describes a post-closing trial balance.

It is a listing of all permanent accounts and their balances after closing.

Define the Income Summary account.

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

Which of the following defines long-term liabilities?

Long-term liabilities are debts of a business that are not due to be settled within one year.

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.)

Noncurrent (long-term) liabilities. Current assets. Plant assets. Long-term investments.

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

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

Office supplies Prepaid rent Cash Accounts receivable

Select the statements below that describe the purpose of a post-closing trial balance. (Check all that apply.)

One purpose is to verify that total debits equal total credit for permanent accounts. One purpose is to verify that all temporary accounts have zero balances.

Define equity by completing the following statement. Equity is the (creditor's/litigator's/owner's) claim on the assets of a business. In a proprietorship, this claim is reported in the (asset/equity/liability) section of a balance sheet in the (Capital/Revenue/Cash) account.

Owner's; equity; Capital

Which of the accounts below would appear in the equity section of a classified balance sheet?

Owner, Capital

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.

Identify which of the following steps in the accounting cycle is optional.

Reversing journal entries

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

Taxes payable Unearned rent Accounts payable Notes payable (due in three months)

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.

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

Trademark Franchise Goodwill Copyrights Patent

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.

Which of the following lists contains only temporary accounts?

Wages Expense; Income Summary; Owner, Withdrawals

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

is more useful to decision makers. organizes assets and liabilities into important subgroups. lists current assets in the order of how quickly they can be converted to cash.

What is an intangible asset? (Check all that apply.)

long-term resources that benefit business operations, but lack physical form. the value of intangible assets comes from the privileges or rights granted to or held by the owner.

Closing means to transfer account balances from (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