Exam 4: Completion of the Accounting Cycle

An important purpose of closing entries is to set permanent account balances to zero in order to begin the next period.

The work sheet is a type of:

Use this adjusted trial balance to answer the following question. -Prepare the December 31 closing entries for T. Ball Company.

The acid test ratio is a test of the company's immediate liquidity.

After the closing entries have been posted, the balance in the owner's capital account should equal the ending balance of the owner's equity account as reported on the balance sheet.

A work sheet makes it easier to prepare interim (e.g., monthly or quarterly) financial information..

The preparation of reversing entries is a required step in the accounting cycle.

Current assets are cash and other assets that are converted to cash, sold or used, but not within the coming year.

Use this adjusted trial balance to answer the following question. -Calculate the current ratio and the acid-test ratio for T. Ball Company.

Indicate whether the following items are current or non-current items on the balance sheet: _____ Accounts receivable _____ Unearned revenue _____ Prepaid expense _____ Bonds payable _____ Interest payable _____ Goodwill _____ Interest receivable _____ Copyright _____ Mortgage

Adjustments are journalized and posted only at the end of an accounting period, whereas correcting entries are journalized and posted whenever an error is discovered.

The post-closing trial balance will:

Define and give an example of a current liability and a current asset.

Identify the following accounts as either Temporary (T) or Permanent (P) accounts. -Prepaid Expenses ______ Accounts Receivable ______ Service Revenue ______ J. Atkins, Capital ______ Rent Expense ______ Unearned Revenue ______ J. Atkins, Drawings ______ Interest Payable ______

If current assets are $1,500 and current liabilities are $1,000, the working capital is:

Non-current liabilities such as bank notes payable, mortgages payable, and bonds payable are expected to be paid from existing current assets.

Unearned revenue is an example of a revenue.

The closing entry for the drawings accounts will require:

The relationship between current assets and current liabilities is important in evaluating a company's liquidity.

The following are the nine steps in the accounting cycle. Put the steps in the correct order by writing the correct step number beside each step. _____ Prepare financial statements _____ Post to ledger accounts _____ Analyze business transactions _____ Journalize and post closing entries _____ Prepare a trial balance _____ Prepare an adjusted trial balance _____ Journalize the transactions _____ Journalize and post adjusting entries _____ Prepare a post-closing trial balance