Question 1

On 1 November Yasmine Company Pty Ltd issued 100 000 shares for $5 each. The correct entry to record this transaction is:

Accepted Answer

A)  DR Cash $500 000; CR Shareholder's equity $500 000. 
B)  DR Cash $500 000; CR Share capital $500 000 
C)  DR Cash $500 000; CR Share capital $500 000. 
D)  DR Shareholder's equity $500 000; CR Cash $500 000 
A)  DR Cash $500 000; CR Shareholder's equity $500 000. 
B)  DR Cash $500 000; CR Share capital $500 000 
C)  DR Cash $500 000; CR Share capital $500 000. 
D)  DR Shareholder's equity $500 000; CR Cash $500 000

Question 2

Entries made at the beginning of the next accounting period to reverse the effect of various adjustments, are called:

Accepted Answer

A)  re-adjusting entries. 
B)  reversing entries. 
C)  simplified entries. 
D)  negative entries. 
A)  re-adjusting entries. 
B)  reversing entries. 
C)  simplified entries. 
D)  negative entries.

Question 3

The balance of the rent expense account is $1800. The correct closing entry recorded in the general journal is:

Accepted Answer

The answer of The balance of the rent expense account...

Question 4

Which of the following accounts should be closed off to the profit or loss summary account at the end of the financial period?

Accepted Answer

A)  Insurance expense 
B)  Sales income 
C)  Depreciation 
D)  All of these accounts. 
A)  Insurance expense 
B)  Sales income 
C)  Depreciation 
D)  All of these accounts.

Question 5

The two main categories of equity on a company's balance sheet are separated into:

Accepted Answer

A)  Retained earnings and dividends 
B)  Share capital and dividends 
C)  Share capital and retained earnings 
D)  Retained earnings and reserves 
A)  Retained earnings and dividends 
B)  Share capital and dividends 
C)  Share capital and retained earnings 
D)  Retained earnings and reserves

Question 6

Before calculating the profit for the period, the totals of the income statement columns on the worksheet are: total debits $70 000 and total credits $60 000. The amount of the profit or loss is:

Accepted Answer

A)  $10 000 loss 
B)  $10 000 profit 
C)  $70 000 profit 
D)  $60 000 profit 
A)  $10 000 loss 
B)  $10 000 profit 
C)  $70 000 profit 
D)  $60 000 profit

Question 7

Cash distributions authorised by the directors and paid to the owners of a company are called:

Accepted Answer

A)  distributions. 
B)  bonuses. 
C)  accumulated profits. 
D)  dividends. 
A)  distributions. 
B)  bonuses. 
C)  accumulated profits. 
D)  dividends.

Question 8

The income statement and the balance sheet for sole traders and partnerships are essentially the same except for transactions that directly affect:

Accepted Answer

A)  profit. 
B)  income. 
C)  equity. 
D)  assets. 
A)  profit. 
B)  income. 
C)  equity. 
D)  assets.

Question 9

In accounting for a partnership, capital and drawings accounts are:

Accepted Answer

A)  separate for all shareholders. 
B)  separate for each partner. 
C)  part of retained earnings. 
D)  combined for all partners. 
A)  separate for all shareholders. 
B)  separate for each partner. 
C)  part of retained earnings. 
D)  combined for all partners.

Question 10

Declared dividends are recognised as:

Accepted Answer

A)  a reduction in share capital. 
B)  a reduction in retained earnings. 
C)  an expense 
D)  an asset. 
A)  a reduction in share capital. 
B)  a reduction in retained earnings. 
C)  an expense 
D)  an asset.

Question 11

A post-closing trial balance is prepared so that:

Accepted Answer

A)  the adjusting entries can be completed. 
B)  the entity can determine if any adjusting entries have been missed. 
C)  the equality of debits and credits in the general ledger can be tested to ensure the opening position is correct for the next period. 
D)  all pre-closing account balances can be confirmed as correct. 
A)  the adjusting entries can be completed. 
B)  the entity can determine if any adjusting entries have been missed. 
C)  the equality of debits and credits in the general ledger can be tested to ensure the opening position is correct for the next period. 
D)  all pre-closing account balances can be confirmed as correct.

Question 12

What is the correct order for the steps in the closing process?
I Close the drawings account to the owner's capital account
II Balance the owner's capital account
III Transfer the profit or loss to the owner's capital account
IV Close the income and expense accounts to the profit or loss summary account

Accepted Answer

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

Question 13

The balance in the profit or loss summary account before it is closed represents:

Accepted Answer

A)  total expenses. 
B)  profit (or loss) less drawings. 
C)  total owner's capital. 
D)  profit (or loss) for the period. 
A)  total expenses. 
B)  profit (or loss) less drawings. 
C)  total owner's capital. 
D)  profit (or loss) for the period.

Question 14

The main reason for preparing a post-closing trial balance is to:

Accepted Answer

A)  determine if any closing entries have been missed. 
B)  determine if any adjusting entries have been missed. 
C)  confirm that the ledger is in balance at the start of the new accounting period. 
D)  prepare the financial reports. 
A)  determine if any closing entries have been missed. 
B)  determine if any adjusting entries have been missed. 
C)  confirm that the ledger is in balance at the start of the new accounting period. 
D)  prepare the financial reports.

Question 15

Closing which of the following accounts results in a debit entry to the profit or loss summary account?

Accepted Answer

A)  Sales 
B)  Insurance expense 
C)  Interest revenue 
D)  Drawings 
A)  Sales 
B)  Insurance expense 
C)  Interest revenue 
D)  Drawings

Question 16

Which statement relating to closing entries is incorrect?

Accepted Answer

A)  Closing entries are made each time interim financial reports are prepared. 
B)  Closing entries are only made once a year. 
C)  The need for closing entries arises from the accounting period assumption. 
D)  The closing process is simple with a computerised accounting system. 
A)  Closing entries are made each time interim financial reports are prepared. 
B)  Closing entries are only made once a year. 
C)  The need for closing entries arises from the accounting period assumption. 
D)  The closing process is simple with a computerised accounting system.

Question 17

Which adjustment would never require a reversing entry?

Accepted Answer

A)  Income received in advance (cash received originally recorded in an income account) 
B)  Accrued wages 
C)  Prepaid rent 
D)  Depreciation 
A)  Income received in advance (cash received originally recorded in an income account) 
B)  Accrued wages 
C)  Prepaid rent 
D)  Depreciation

Question 18

At the end of the reporting period, a company is required to prepare which additional financial report?

Accepted Answer

A)  Statement of retained profits 
B)  Statement of equity 
C)  Statement of changes in equity 
D)  Statement of liabilities 
A)  Statement of retained profits 
B)  Statement of equity 
C)  Statement of changes in equity 
D)  Statement of liabilities

Question 19

High Country Ltd issued 50 000 shares for $1 each on 23 May. The correct entry to record this transaction is:

Accepted Answer

A)  DR Bank $50 000; CR Share capital $50 000 
B)  DR Bank $50 000; CR Shareholder's equity $50 000 
C)  DR Bank $50 000; CR Retained earnings $50 000 
D)  DR Share capital $50 000; CR Bank $50 000 
A)  DR Bank $50 000; CR Share capital $50 000 
B)  DR Bank $50 000; CR Shareholder's equity $50 000 
C)  DR Bank $50 000; CR Retained earnings $50 000 
D)  DR Share capital $50 000; CR Bank $50 000

Question 20

Closing entries refer to:

Accepted Answer

A)  establishing zero balances in all ledger accounts. 
B)  establishing a zero balance in the cash at bank account. 
C)  establishing zero balances in the balance sheet accounts. 
D)  transferring income and expense account balances to the profit or loss summary account, which is then closed to the equity account. 
A)  establishing zero balances in all ledger accounts. 
B)  establishing a zero balance in the cash at bank account. 
C)  establishing zero balances in the balance sheet accounts. 
D)  transferring income and expense account balances to the profit or loss summary account, which is then closed to the equity account.

Exam 5: Completing the Accounting Cycle Closing and Reversing Entries

On 1 November Yasmine Company Pty Ltd issued 100 000 shares for $5 each. The correct entry to record this transaction is:

Entries made at the beginning of the next accounting period to reverse the effect of various adjustments, are called:

The balance of the rent expense account is $1800. The correct closing entry recorded in the general journal is:

Which of the following accounts should be closed off to the profit or loss summary account at the end of the financial period?

The two main categories of equity on a company's balance sheet are separated into:

Before calculating the profit for the period, the totals of the income statement columns on the worksheet are: total debits $70 000 and total credits $60 000. The amount of the profit or loss is:

Cash distributions authorised by the directors and paid to the owners of a company are called:

The income statement and the balance sheet for sole traders and partnerships are essentially the same except for transactions that directly affect:

In accounting for a partnership, capital and drawings accounts are:

Declared dividends are recognised as:

A post-closing trial balance is prepared so that:

The balance in the profit or loss summary account before it is closed represents:

The main reason for preparing a post-closing trial balance is to:

Closing which of the following accounts results in a debit entry to the profit or loss summary account?

Which statement relating to closing entries is incorrect?

Which adjustment would never require a reversing entry?

At the end of the reporting period, a company is required to prepare which additional financial report?

High Country Ltd issued 50 000 shares for $1 each on 23 May. The correct entry to record this transaction is:

Closing entries refer to:

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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