Question 1

Because income and expenses are accumulated for only one year they are known as:

Accepted Answer

A)  temporary accounts. 
B)  permanent accounts. 
C)  short-term accounts. 
D)  yearly accounts. 
A)  temporary accounts. 
B)  permanent accounts. 
C)  short-term accounts. 
D)  yearly accounts. A

Question 2

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

Accepted Answer

A)  The balance in each income and expense account is transferred to the profit or loss summary 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 the profit or loss summary account is transferred to the owner's capital account. 
A)  The balance in each income and expense account is transferred to the profit or loss summary 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 the profit or loss summary account is transferred to the owner's capital account. B

Question 3

Accounting entries made at the end of an accounting year to reduce expense and income accounts to zero are called:

Accepted Answer

A)  adjusting entries. 
B)  correcting entries. 
C)  end of period entries. 
D)  closing entries. 
A)  adjusting entries. 
B)  correcting entries. 
C)  end of period entries. 
D)  closing entries. D

Question 4

On 1 January Make More Company Pty Ltd issued 10 000 shares for $3 each. Which of the following is the correct entry to record this transaction?

Accepted Answer

A)  Debit bank $30 000; credit shareholder's equity $30 000 
B)  Debit bank $10 000; credit share capital $10 000 
C)  Debit bank $30 000; credit share capital $30 000 
D)  Debit share capital $10 000; credit bank $10 000 
A)  Debit bank $30 000; credit shareholder's equity $30 000 
B)  Debit bank $10 000; credit share capital $10 000 
C)  Debit bank $30 000; credit share capital $30 000 
D)  Debit share capital $10 000; credit bank $10 000

Question 5

Closing which of these accounts results in a credit to the profit or loss summary account?

Accepted Answer

A)  Sales 
B)  Insurance expense 
C)  Depreciation 
D)  Drawings 
A)  Sales 
B)  Insurance expense 
C)  Depreciation 
D)  Drawings

Question 6

Which of these is not recorded on a worksheet?

Accepted Answer

A)  Closing entries 
B)  Drawings 
C)  Adjusting entries 
D)  Profit for the period 
A)  Closing entries 
B)  Drawings 
C)  Adjusting entries 
D)  Profit for the period

Question 7

In the closing process which accounts are closed?

Accepted Answer

A)  All ledger accounts 
B)  All asset, liability and equity accounts 
C)  All income and expense accounts 
D)  All accounts that have been adjusted 
A)  All ledger accounts 
B)  All asset, liability and equity accounts 
C)  All income and expense accounts 
D)  All accounts that have been adjusted

Question 8

Closing entries are made:

Accepted Answer

A)  in the ledger only. 
B)  in the journal and the ledger. 
C)  in the journal only. 
D)  on the worksheet. 
A)  in the ledger only. 
B)  in the journal and the ledger. 
C)  in the journal only. 
D)  on the worksheet.

Question 9

Cash distributions made to the owners of a company by the directors are called:

Accepted Answer

A)  drawings. 
B)  retained profits. 
C)  dividends. 
D)  shares. 
A)  drawings. 
B)  retained profits. 
C)  dividends. 
D)  shares.

Question 10

Interim statements are:

Accepted Answer

A)  summary statements. 
B)  prepared by junior staff when the accountant is busy. 
C)  prepared between the annual reports, usually half-yearly, quarterly or monthly. 
D)  used by creditors to deal with an emergency. 
A)  summary statements. 
B)  prepared by junior staff when the accountant is busy. 
C)  prepared between the annual reports, usually half-yearly, quarterly or monthly. 
D)  used by creditors to deal with an emergency.

Question 11

Which of the following is the correct closing entry for sales income of $30 000?

Accepted Answer

A)  Debit sales income $30 000; credit equity $30 000 
B)  Debit profit or loss summary account $30 000; credit sales income $30 000 
C)  Debit equity $30 000; credit sales income $30 000 
D)  Debit sales income $30 000; credit profit or loss summary account $30 000 
A)  Debit sales income $30 000; credit equity $30 000 
B)  Debit profit or loss summary account $30 000; credit sales income $30 000 
C)  Debit equity $30 000; credit sales income $30 000 
D)  Debit sales income $30 000; credit profit or loss summary account $30 000

Question 12

Income and expense accounts can be referred to as:

Accepted Answer

A)  incurred accounts. 
B)  temporary accounts. 
C)  personal accounts. 
D)  permanent accounts. 
A)  incurred accounts. 
B)  temporary accounts. 
C)  personal accounts. 
D)  permanent accounts.

Question 13

On a worksheet if the opening balance of the salaries expenses account was $7000, a reversing entry for $800 was completed for salaries accrued in the previous year and $600 of salaries were prepaid in the current year the balance of salaries expense transferred to the income statement column would be:

Accepted Answer

A)  $6800. 
B)  $7200. 
C)  $8400. 
D)  $5600. 
A)  $6800. 
B)  $7200. 
C)  $8400. 
D)  $5600.

Question 14

What type of account is dividend payable?

Accepted Answer

A)  Asset 
B)  Liability 
C)  Income 
D)  Equity 
A)  Asset 
B)  Liability 
C)  Income 
D)  Equity

Question 15

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

Accepted Answer

A)  Insurance payable 
B)  Prepaid insurance 
C)  Accumulated depreciation 
D)  Depreciation 
A)  Insurance payable 
B)  Prepaid insurance 
C)  Accumulated depreciation 
D)  Depreciation

Question 16

On 1 January Y Company Pty Ltd issued 100 000 shares for $2 each. Which of the following is the correct entry to record this transaction?

Accepted Answer

A)  Debit bank $200 000; credit shareholder's equity $200 000 
B)  Debit bank $200 000; credit share capital $200 000 
C)  Debit bank $100 000; credit share capital $100 000 
D)  Debit shareholder's equity $200 000; credit bank $200 000 
A)  Debit bank $200 000; credit shareholder's equity $200 000 
B)  Debit bank $200 000; credit share capital $200 000 
C)  Debit bank $100 000; credit share capital $100 000 
D)  Debit shareholder's equity $200 000; credit bank $200 000

Question 17

Dividends require two accounting entries, one when the dividend is declared and another when it is paid. What is the correct entry to record the declaration of a cash dividend of 20c a share calculated on 100 000 shares?

Accepted Answer

A)  Debit dividend payable $20 000; credit cash at bank $20 000 
B)  Debit retained profits $20 000; credit dividend payable $20 000 
C)  Debit bank $20 000; credit share capital $20 000 
D)  Debit dividend payable $20 000; credit retained profits $20 000 
A)  Debit dividend payable $20 000; credit cash at bank $20 000 
B)  Debit retained profits $20 000; credit dividend payable $20 000 
C)  Debit bank $20 000; credit share capital $20 000 
D)  Debit dividend payable $20 000; credit retained profits $20 000

Question 18

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

Accepted Answer

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

Question 19

When reversing entries are used in the accounting system which of the following categories of adjusting entries are always reversed?
Accrued Expenses Accrued Revenue Depreciation

Accepted Answer

A)  Yes Yes Yes 
B)  No No No 
C)  Yes Yes No 
D)  No No Yes 
A)  Yes Yes Yes 
B)  No No No 
C)  Yes Yes No 
D)  No No Yes

Question 20

Assume that no reversing entries are made by this firm. If wages of $11 200 were accrued by it at the end of the year and the first payment of wages in the subsequent year was $101 600 how would this payment be recorded?

Accepted Answer

A)  Debit salaries payable $11 200; debit salaries expense $90 400; credit cash $101 600 
B)  Credit salaries payable $11 200; debit salaries expense $112 800; credit cash $101 600 
C)  Debit salaries payable $11 200; debit salaries expense $101 600; credit cash $112 800 
D)  Debit salaries expense $90 400; credit cash $90 400 
A)  Debit salaries payable $11 200; debit salaries expense $90 400; credit cash $101 600 
B)  Credit salaries payable $11 200; debit salaries expense $112 800; credit cash $101 600 
C)  Debit salaries payable $11 200; debit salaries expense $101 600; credit cash $112 800 
D)  Debit salaries expense $90 400; credit cash $90 400

Exam 5: Completing the Accounting Cycle Closing and Reversing Entries

Because income and expenses are accumulated for only one year they are known as:

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

Accounting entries made at the end of an accounting year to reduce expense and income accounts to zero are called:

On 1 January Make More Company Pty Ltd issued 10 000 shares for $3 each. Which of the following is the correct entry to record this transaction?

Closing which of these accounts results in a credit to the profit or loss summary account?

Which of these is not recorded on a worksheet?

In the closing process which accounts are closed?

Closing entries are made:

Cash distributions made to the owners of a company by the directors are called:

Interim statements are:

Which of the following is the correct closing entry for sales income of $30 000?

Income and expense accounts can be referred to as:

What type of account is dividend payable?

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

On 1 January Y Company Pty Ltd issued 100 000 shares for $2 each. Which of the following is the correct entry to record this transaction?

Dividends require two accounting entries, one when the dividend is declared and another when it is paid. What is the correct entry to record the declaration of a cash dividend of 20c a share calculated on 100 000 shares?

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

When reversing entries are used in the accounting system which of the following categories of adjusting entries are always reversed? Accrued Expenses Accrued Revenue Depreciation

Assume that no reversing entries are made by this firm. If wages of $11 200 were accrued by it at the end of the year and the first payment of wages in the subsequent year was $101 600 how would this payment be recorded?

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

Accounting for Manufacturing

Cost Accounting Systems

Cash Management and Control

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

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

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