Question 1

The correct closing entry for the bank account is:

Accepted Answer

A)  DR Owner's capital account; CR Bank 
B)  DR Bank; CR Owner's capital account 
C)  DR Profit or loss summary account; CR Bank 
D)  No closing entry is required 
A)  DR Owner's capital account; CR Bank 
B)  DR Bank; CR Owner's capital account 
C)  DR Profit or loss summary account; CR Bank 
D)  No closing entry is required D

Question 2

Which of the following is the correct treatment on the worksheet for the nominated item?

Accepted Answer

A)  GST payable account, credit the income statement and credit the balance sheet. 
B)  Depreciation account, debit the balance sheet and credit the adjustments. 
C)  Cash at bank account, credit the adjustments and debit the balance sheet. 
D)  Profit earned, debit the income statement and credit the balance sheet. 
A)  GST payable account, credit the income statement and credit the balance sheet. 
B)  Depreciation account, debit the balance sheet and credit the adjustments. 
C)  Cash at bank account, credit the adjustments and debit the balance sheet. 
D)  Profit earned, debit the income statement and credit the balance sheet. D

Question 3

Which of these is not a purpose of a post-closing trial balance?

Accepted Answer

A)  Determining how much profit the entity has made. 
B)  Testing for the equality of debits and credits in the general ledger. 
C)  Making sure the ledger is correct as the starting point for the next financial period. 
D)  Checking that all the revenue and expense accounts have been closed-off. 
A)  Determining how much profit the entity has made. 
B)  Testing for the equality of debits and credits in the general ledger. 
C)  Making sure the ledger is correct as the starting point for the next financial period. 
D)  Checking that all the revenue and expense accounts have been closed-off. A

Question 4

In which order do these steps in the accounting cycle occur?
I Prepare reversing entries
Ii Prepare financial statements
Iii Prepare closing entries
Iv Prepare an adjusted trial balance
V Prepare adjusting entries

Accepted Answer

A)  iii, v, i, iv, ii 
B)  v, iii, iv, i, ii 
C)  iv, iv, iii, ii, i 
D)  v, iii, i, ii, iv 
A)  iii, v, i, iv, ii 
B)  v, iii, iv, i, ii 
C)  iv, iv, iii, ii, i 
D)  v, iii, i, ii, iv

Question 5

Dividends declared near the end of an accounting period require two accounting entries:
1) when the dividend is declared; and
2) when the dividend is paid.
The correct entry to record the declaration of a cash dividend of 10c a share calculated on 200 000 shares is:

Accepted Answer

A)  DR Dividend payable $20 000; CR Bank $20 000 
B)  DR Bank $20 000; CR Share capital $20 000 
C)  DR Retained earnings $20 000; CR Dividend payable $20 000 
D)  DR Dividend payable $20 000; CR Retained earnings $20 000 
A)  DR Dividend payable $20 000; CR Bank $20 000 
B)  DR Bank $20 000; CR Share capital $20 000 
C)  DR Retained earnings $20 000; CR Dividend payable $20 000 
D)  DR Dividend payable $20 000; CR Retained earnings $20 000

Question 6

The post-closing trial balance contains only:

Accepted Answer

A)  balance sheet accounts. 
B)  temporary accounts. 
C)  income statement accounts. 
D)  asset and equity accounts. 
A)  balance sheet accounts. 
B)  temporary accounts. 
C)  income statement accounts. 
D)  asset and equity accounts.

Question 7

Which of the following statements relating to reversing entries is correct?

Accepted Answer

A)  Reversing entries are rarely used. 
B)  Reversing entries are never appropriate for accrual type entries. 
C)  Depreciation is an adjustment that requires reversing in the subsequent period. 
D)  There are alternative ways of dealing with the effect of accruals in subsequent periods without using reversing entries. 
A)  Reversing entries are rarely used. 
B)  Reversing entries are never appropriate for accrual type entries. 
C)  Depreciation is an adjustment that requires reversing in the subsequent period. 
D)  There are alternative ways of dealing with the effect of accruals in subsequent periods without using reversing entries.

Question 8

In which order do these steps in the accounting cycle occur?
I Prepare adjusting entries
II Prepare financial statements
III Record business transactions in the journal
IV Post to the ledger
V Journalise closing entries

Accepted Answer

A)  I, II, III, IV, V 
B)  III, IV, I, V, II 
C)  IV, II, I, III, V 
D)  III, II, IV, V, I 
A)  I, II, III, IV, V 
B)  III, IV, I, V, II 
C)  IV, II, I, III, V 
D)  III, II, IV, V, I

Question 9

Which of the following is the correct closing entry for a profit of $78 400?

Accepted Answer

A)  DR Profit or loss summary account $78 400; CR Owner's capital account $78 400 
B)  DR Owner's capital account $78 400; CR Profit or loss summary account $78 400 
C)  DR Owner's capital account $78 400; CR Bank $78 400 
D)  No closing entry is required 
A)  DR Profit or loss summary account $78 400; CR Owner's capital account $78 400 
B)  DR Owner's capital account $78 400; CR Profit or loss summary account $78 400 
C)  DR Owner's capital account $78 400; CR Bank $78 400 
D)  No closing entry is required

Question 10

Income and expense accounts can be referred to as:

Accepted Answer

A)  normal accounts. 
B)  permanent accounts. 
C)  temporary accounts. 
D)  profit accounts. 
A)  normal accounts. 
B)  permanent accounts. 
C)  temporary accounts. 
D)  profit accounts.

Question 11

Which accounts are closed in the closing process?

Accepted Answer

A)  All ledger accounts 
B)  All balance sheet accounts 
C)  All unadjusted accounts 
D)  All income and expense accounts 
A)  All ledger accounts 
B)  All balance sheet accounts 
C)  All unadjusted accounts 
D)  All income and expense accounts

Question 12

Which of the following categories of adjusting entries are always reversed when an entity uses reversing entries in their accounting system?
I. Accrued Expenses
II. Accrued Revenue
III. Depreciation

Accepted Answer

A)  All of these. 
B)  I and III only. 
C)  I and II only. 
D)  III only. 
A)  All of these. 
B)  I and III only. 
C)  I and II only. 
D)  III only.

Question 13

Which statement relating to the profit or loss summary account is incorrect?

Accepted Answer

A)  The balance in the profit or loss summary account is transferred to the owner's capital account. 
B)  The profit or loss summary account is a permanent account. 
C)  The profit or loss summary account is established to summarise the balances in the income and expense accounts. 
D)  The balance in each income and expense account is transferred to the profit or loss summary account. 
A)  The balance in the profit or loss summary account is transferred to the owner's capital account. 
B)  The profit or loss summary account is a permanent account. 
C)  The profit or loss summary account is established to summarise the balances in the income and expense accounts. 
D)  The balance in each income and expense account is transferred to the profit or loss summary account.

Question 14

Which of the following is not a temporary account?

Accepted Answer

A)  Cash at bank 
B)  Interest revenue 
C)  Drawings 
D)  Rent expense 
A)  Cash at bank 
B)  Interest revenue 
C)  Drawings 
D)  Rent expense

Question 15

Telephone expenses for the year are $13 200. This amount is made up of cash payments of $12 500 and accrued telephone expenses of $700. What is the amount of telephone expenses that is closed to the profit and loss summary account?

Accepted Answer

A)  Nil 
B)  $700 
C)  $12 500 
D)  $13 200 
A)  Nil 
B)  $700 
C)  $12 500 
D)  $13 200

Question 16

The correct closing entry for sales income of $60 000 is:

Accepted Answer

A)  DR Sales income $60 000; CR Capital $60 000 
B)  DR Capital $60 000; CR Sales income $60 000 
C)  DR Sales income $60 000; CR Profit or loss summary account $60 000 
D)  DR Profit or loss summary account $60 000; CR Sales income $60 000 
A)  DR Sales income $60 000; CR Capital $60 000 
B)  DR Capital $60 000; CR Sales income $60 000 
C)  DR Sales income $60 000; CR Profit or loss summary account $60 000 
D)  DR Profit or loss summary account $60 000; CR Sales income $60 000

Question 17

The Profit or Loss Summary account is what type of account?

Accepted Answer

A)  short-term account 
B)  asset account 
C)  temporary account 
D)  current account 
A)  short-term account 
B)  asset account 
C)  temporary account 
D)  current account

Question 18

The drawings account has a normal balance of $30 000. The correct entry to close this account is:

Accepted Answer

A)  DR Profit or loss summary account $30 000; CR Drawings $30 000 
B)  DR Owner's capital account $30 000; CR Drawings $30 000 
C)  DR Drawings $30 000; CR Bank $30 000 
D)  DR Bank $30 000; CR Drawings $30 000 
A)  DR Profit or loss summary account $30 000; CR Drawings $30 000 
B)  DR Owner's capital account $30 000; CR Drawings $30 000 
C)  DR Drawings $30 000; CR Bank $30 000 
D)  DR Bank $30 000; CR Drawings $30 000

Question 19

Which of the following statements is correct with regards to closing the accounts of a partnership?

Accepted Answer

A)  Partners are owners; therefore partner's salaries must be treated as drawings. 
B)  Partnership profit is credited to each partner's capital account according to the profit sharing agreement. 
C)  Partnership accounts use a retained earnings account instead of a profit or loss summary account. 
D)  A partnership loss for the period is carried forward and is not transferred to the partner's capital accounts. 
A)  Partners are owners; therefore partner's salaries must be treated as drawings. 
B)  Partnership profit is credited to each partner's capital account according to the profit sharing agreement. 
C)  Partnership accounts use a retained earnings account instead of a profit or loss summary account. 
D)  A partnership loss for the period is carried forward and is not transferred to the partner's capital accounts.

Question 20

Which of the following statements about closing entries is correct?

Accepted Answer

A)  The profit or loss summary account is used regularly when processing transactions for sales and expenses. 
B)  Computerised accounting systems have eliminated the need to close off the income and expense accounts. 
C)  Closing entries are made at the end of each accounting period whatever its length. 
D)  Closing entries are only made at the end of the accounting year. 
A)  The profit or loss summary account is used regularly when processing transactions for sales and expenses. 
B)  Computerised accounting systems have eliminated the need to close off the income and expense accounts. 
C)  Closing entries are made at the end of each accounting period whatever its length. 
D)  Closing entries are only made at the end of the accounting year.

Exam 5: Completing the Accounting Cycle Closing and Reversing Entries

The correct closing entry for the bank account is:

Which of the following is the correct treatment on the worksheet for the nominated item?

Which of these is not a purpose of a post-closing trial balance?

In which order do these steps in the accounting cycle occur? I Prepare reversing entries Ii Prepare financial statements Iii Prepare closing entries Iv Prepare an adjusted trial balance V Prepare adjusting entries

Dividends declared near the end of an accounting period require two accounting entries: 1) when the dividend is declared; and 2) when the dividend is paid. The correct entry to record the declaration of a cash dividend of 10c a share calculated on 200 000 shares is:

The post-closing trial balance contains only:

Which of the following statements relating to reversing entries is correct?

In which order do these steps in the accounting cycle occur? I Prepare adjusting entries II Prepare financial statements III Record business transactions in the journal IV Post to the ledger V Journalise closing entries

Which of the following is the correct closing entry for a profit of $78 400?

Income and expense accounts can be referred to as:

Which accounts are closed in the closing process?

Which of the following categories of adjusting entries are always reversed when an entity uses reversing entries in their accounting system? I. Accrued Expenses II. Accrued Revenue III. Depreciation

Which statement relating to the profit or loss summary account is incorrect?

Which of the following is not a temporary account?

Telephone expenses for the year are $13 200. This amount is made up of cash payments of $12 500 and accrued telephone expenses of $700. What is the amount of telephone expenses that is closed to the profit and loss summary account?

The correct closing entry for sales income of $60 000 is:

The Profit or Loss Summary account is what type of account?

The drawings account has a normal balance of $30 000. The correct entry to close this account is:

Which of the following statements is correct with regards to closing the accounts of a partnership?

Which of the following statements about closing entries is correct?

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Accounting for Retailing

Accounting for Systems

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation, Disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Accounting for Manufacturing

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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