Accounting Module 2- (Chapter 3)

-cash -retained earnings -prepaid insurance -equipment -common stock -retained earnings -accounts payable -supplies -account receivable

What accounts would appear on the post-closing trial balance

current assets

cash and other resources that are expected to be sold, collected or used within one year

current assets

cash and other resources that are expected to be sold, collected, or used within one year

interim financial statements

cover less than one year, usually spanning one, three, or six month periods

1. enter unadjusted trial balance 2. enter adjustments 3. prepare adjusted trial balance 4. sort adjusted trial balance amounts to financial statements 5. total financial statement columns, compute income or loss and balance columns

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

year

most organizations use a ______ as their primary accounting period

unclassified balance sheet

one whose items are broadly grouped into assets, liabilities, and equity

time period assumption

presume that an organization's activities can be divided into specific time periods such as a month, a three-month quarter, a six-month interval, or a year

annual financial statements

reports covering a one-year period

statement of cash flows

reports the inflows and outflows of cash during a period of time

-total liabilities -total assets

what is listed on a unclassified balance sheet

at the end of an accounting period

when does the closing process take place

1- determine that the current account balance equals 2- determine what the current account balance should equal 3- record an adjusting entry to get from step 1 to step 2

Adjustments are made using a 3 step process:

-total assets -total liabilities

All of the following are on an unclassified balance sheet: (Check all that apply). Total noncurrent liabilities Total assets Total current liabilities Total current assets Total noncurrent assets Total liabilities

reversing entry

-entry that is used for adjusting entries involving accrued revenues and accrued expenses. -entry that is the exact opposite of an accrual adjusting entry. -optional entry. -entry whose purpose is to simplify a company's record keeping

Revenue Recognition Principle

-revenue is recognized when it is earned -should be recorded when goods or services are provided to customers at an amount expected to be received

-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.

A classified balance sheet can be described as a balance sheet that: (Check all that apply.) -contains subgroups for expenses and revenues. -lists all assets according to the size of their balance with larger dollar amounts listed first. -lists current assets in the order of how quickly they can be converted to cash. -is more useful to decision makers. -organizes assets and liabilities into important subgroups.

-permanent -ledger -after -closing

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.

true

Are temporary accounts posted on the income statement

-end -adjusted -after

The closing process takes place at the ____ (end/beginning) of an accounting period, after the ____ (adjusted/unadjusted) trail balance is prepared and ____ (after/before) the financial statements are prepared.

-one or more balance sheet accounts and one or more income statement accounts

adjusting entries affect

temporary account

are dividends a temporary or permanent account

credit balance of 140,000

assume that the accumulated depreciation account has an unadjusted normal balance of 120,000. the company's list of adjusting entires includes one that debits Depreciation Expense and credits the accumulated depreciation account for 20,000. the adjusted balance in the accumulated depreciation account is a

true

do permanent accounts appear on a post-closing trial balance

true

do temporary accounts have a balance for one period only

adjusting entry

each _______ made at the end of an accounting period reflects a transaction or event that is not yet recorded

permanent account

is retained earnings a permanent or temporary account

work sheet

this can help with adjusting and closing accounts and with preparing financial statements

-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.

what are the purposes of a post-closing trial balance

1. analyze transactions 2. journalize 3. post 4. prepare unadjusted trial balance 5. adjust accounts 6. prepare adjusted trial balance 7. Prepare financial statements 8. Close accounts 9. Prepare post closing trial balance 10. prepare reversing entries

what are the steps in the accounting cycle

work sheet

an internal accounting aid which helps in preparing financial statement

prepaid expenses

are assets paid for in advance of receiving their benefits. when these assets are used, those advance payments become expenses

true

are permanent accounts reported on the balance sheet?

closing means to bring an account balance to zero

Choose the statement below that explains what "closing" means. -Closing means to bring an account balance to zero. -Closing means to adjust an account's balance to its correct amount. -Closing means to transfer the balance in an account to an asset account. -Closing means to transfer an expense account's balance to the income statement.

The final step is to create an adjusting journal entry to get from step 1 to step 2.

Describe the final step in the adjusting process

cash basis accounting

Expenses are recorded when they are paid and revenues are recorded when payment is received

-cash -accounts receivable -office supplies -prepaid rent

Identify which of the accounts below would be classified as a current asset. -prepaid rent -cash -land -accounts receivable -office supplies

-retained earnings -dividends

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence. In order to prepare the statement of retained earnings, the balance of the _______ account balance as well as any debit balance in the ______ account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement

debit prepaid insurance 800

Mouse Inc. uses the alternative method of accounting for prepayments and purchased a $1,200, 6-month insurance policy. The company immediately debited the Insurance expense account. By the end of the period, $400 of the policy had expired. Demonstrate the required adjustment needed at the end of the period - Debit Prepaid insurance for $400. -debit insurance expenses 400 -debit prepaid insurance 800 -credit prepaid insurance 800

Debit Salaries Payable $100; credit Salaries Expense $100.

On December 31, AB Consulting recorded two days' wages of $100 in an adjusting entry which included a debit to Salaries Expense and a credit to Salaries Payable. On January 1, the accountant prepared a reversing entry which included which of the following?

-The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. -The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. -The adjusted trial balance is used to prepare financial statements. -The unadjusted trial balance is more up to date and should be used to prepare financial statements

What is the difference between an adjusted trial balance and an unadjusted trial balance? -The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. -The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. -The adjusted trial balance is used to prepare financial statements.

-current assets -long term investments -plant assets -intangible assets -current liabilities -long-term liabilities

What is the order of the categories that would appear on a classified balance sheet

-current assets -long term investments -plant assets -intangible assets -current liabilities -long term liabilities

What items appear on a classified balance sheet

-A temporary account will not appear on a post-closing trial balance.

Which of the statements below is correct regarding the difference between a temporary account and a permanent account? -A temporary account will not appear on a post-closing trial balance. -A permanent account will not appear on a post-closing trial balance. -Permanent account balances will be transferred to the Retained Earnings account. -Temporary account balances will be carried to the next accounting period.

-comparability of financial statements is improved -expenses are always recognized in the period in which they are incurred -revenues are always recorded in the period in which they are earned

which of the following statements describes why accrual accounting better reflects a business's performance? -comparability of financial statements is improved -expenses are always recognized in the period in which they are incurred -revenues are always recorded in the period in which they are earned -It provides a better focus and understanding of how cash is spent and why it is received.

accounting cycle

-has ten steps -contains steps for adjusting and closing accounts -series of steps repeated each reporting period -refers to steps followed by a company to prepare its financial statements

-adjustments -balance

Before sorting/transferring amounts to the financial statement columns on a worksheet, the Trial Balance, _______ and adjusted trial balance columns must______

The adjusted trial balance is prepared after adjusting entries have been recorded and posted.

Explain the difference between the unadjusted and the adjusted trial balance

-any unused prepaids existing at the end of period are transferred to asset accounts -record all prepaid expenses with debts to expense accounts

Rather than debiting an asset account, which of the following statements explains an alternate recording procedure to journalize prepaid expenses, such as prepaid rent or supplies. -any unused prepaids existing at the end of period are transferred to asset accounts -record all prepaid expenses with debts to expense accounts

-Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. -Matching of expenses with revenues is a major part of the adjusting process.

Which of the following statements describes the expense recognition (matching) principle? -Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. -Matching of expenses with revenues is a major part of the adjusting process. -Expenses are recorded when they are paid and revenues are recorded when payment is received -revenues are recorded when they are earned or services are preformed

-12 -december

a calendar year end- reporting period is defined as a _____ month period which ends on _________ 31st

-noncurrent (long-term) liabilities -plant assets -long-term investments -current assets

a classified balance sheet has several categories for assets and liabilities including

trial balance

a list of accounts and their balances at a point in time

sort adjusted trial balance amounts to the financial statement columns

after an adjusted trial balance is prepared, what is the next step in completing the work sheet used in preparing financial statements?

all accounts and their balances

an adjusted trial balance includes which of the following

-temporary -zero

closing means to transfer account balances from ________ accounts so that they will start with a _______ balance at the beginning of the next period

cash basis accounting

records revenues when cash is received and records expenses when cash is paid

Accrual Basis Accounting

records revenues when services and products are delivered and records expenses when incurred (matched with revenues)

accounting cycle

repeated each reporting period and refers to the steps taken in preparing financial statements.

balance sheet

reports a business's assets, liabilities, and equity on a specific date

income statmente

reports a business's revenues and expenses for a period of time

Expense recognition principle (matching principle)

requires that expenses be recorded in the same accounting period as the revenues that are recognized as a result of those expenses

Revenue Recognition Principle

requires that revenue be recorded when goods or services are provided to customers and at an amount expected to be received from customers

-revenue recognition principle -expense recognition principle

we use two principles in the adjusting process

-equipment -land

what are some examples of long term assets

1- close the revenue accounts 2- close the expense accounts 3- close the income summary account 4- close the dividends account

what are the four steps of the closing process