Exam 4: Completing the Accounting Cycle and Classifying Accounts

The first five steps in the accounting cycle include analyzing transactions, journalizing, posting, preparing an unadjusted trial balance, and recording adjusting entries.

Which statement is true about liquidity? Prepaid Rent is

Assets are classified into current assets, investments, property, plant and equipment, and intangible assets.

Accounts that are used to describe assets, liabilities, and equity, that are not closed as long as the company continues to own the assets, owe the liabilities, or have equity, and whose balances appear on the balance sheet are called

Describe a work sheet and explain why it is useful.

Indicate beside each of the following accounts whether the account is a temporary or permanent account.(a) Cash(b) Prepaid insurance(c) Unearned Revenue(d) Accounts receivable(e) Insurance expense(f) Smith, capital(g) Smith, withdrawals(h) Rent expense(i) Revenue(j) Supplies(k) Supplies expense(l) Depreciation expense, building(m) Accumulated depreciation, building

Using the following partial Excel work sheet for Breakout Maze Co., prepare the Income Statement, the Statement of Changes in Equity, and an unclassified Balance Sheet for the company. Assume the owner did not make any investments in the business during the year.

Which statement is incorrect?

An unclassified balance sheet provides more information to users than a classified balance sheet.

If interim financial statements are required, adjusting entries must be journalized and posted to obtain the adjusted data needed for their preparation.

The current ratio

The items that follow appeared in the Income Statement columns of the work sheet prepared for a sole proprietorship at year-end, December 31, 2020. Also, the owner's withdrawals account was debited for $12,000 during the year. Prepare the necessary closing entries at December 31.

A work sheet can be prepared manually or with a computer spreadsheet program.

Sharp's post-closing trial balance has debit totals of $40,350 and credit totals of $40,650. The next step is to review for errors in the closing process.

Current Liabilities

If all columns balance upon completion of a work sheet, you can be sure that no errors were made in preparing the work sheet.

The alphabetized adjusted trial balance for SimCo Electrical Outfitters at August 31, 2020, is shown below. Identify how each account balance would be classified on a balance sheet given the following classification symbols: CA Curent assets CL Curent liabilities PPE Property, plart ard equipment LTL Long-term liabilities IA Intangible asset OE Equity LTI Long-term irvestment NA Not applicable to a balance sheet

If the Balance Sheet columns of a work sheet fail to balance when the amount of profit is added to the Balance Sheet Credit column, the cause could be

When closing the Withdrawals account

The current ratio