Exam 4: Completing the Accounting Cycle

After posting the entries to close all revenue accounts and all expense accounts, the Income Summary account of Waif Services has a $4,000 debit balance. This result implies that Waif Services earned a net income of $4,000.

The assets section of a classified balance sheet usually includes:

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the:

The closing process takes place after financial statements have been prepared.

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

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

On a work sheet, the adjusted balances of revenues and expenses are sorted to the Income Statement columns of the work sheet.

A company's post-closing trial balance has total debits of $40,350 and total credits of $40,650. Accordingly, the company should review for errors in the closing process.

The J. Godfrey, Capital account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey, Capital account after all closing entries are made?

Based on the adjusted trial balance shown below, prepare a classified balance sheet for Focus Package Delivery. $2,000 of the long-term note payable is due during the next year.

Which of the following statements is incorrect?

The withdrawals account is normally closed by debiting it.

The first step in the accounting cycle is to analyze transactions and events to prepare for journalizing.

Calculate the current ratio in each of the following separate cases.

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

The following adjusted trial balance is for Clara Co. at year-end December 31. The credit balance in Clara, Capital at the beginning of the year, January 1, was $320,000. The owner, Sara Clara, invested an additional $100,000 during the current year. The land held for future expansion was also purchased during the current year. Required: Prepare a classified balance sheet. (Note: A $21,000 installment on the long-term note payable is due within one year.)

Revenue accounts should begin each accounting period with zero balances.

The current ratio:

The closing process resets _______, _________, and ________ account balances to zero at the end of each accounting period.

Adjustments must be entered in the journal and posted to the ledger after the work sheet is prepared.