Question 1

In a company balance sheet, what are the two main categories equity is separated into?

Accepted Answer

A)  Share capital and retained profits 
B)  Retained profits and dividends 
C)  Share capital and dividends 
D)  Retained profits and dividends payable 
A)  Share capital and retained profits 
B)  Retained profits and dividends 
C)  Share capital and dividends 
D)  Retained profits and dividends payable

Question 2

The post-closing trial balance contains only:

Accepted Answer

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

Question 3

The true statement is:

Accepted Answer

A)  reversing entries are always necessary. 
B)  reversing entries are optional and are only made so that the accounting at the beginning of the new accounting period is less complicated. 
C)  all prepayments need to be reversed. 
D)  reversing entries are made on the last day of the financial year. 
A)  reversing entries are always necessary. 
B)  reversing entries are optional and are only made so that the accounting at the beginning of the new accounting period is less complicated. 
C)  all prepayments need to be reversed. 
D)  reversing entries are made on the last day of the financial year.

Question 4

Which statement relating to closing entries is incorrect?

Accepted Answer

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

Question 5

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

Accepted Answer

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

Question 6

Because the balance at the end of one accounting period becomes the opening balance at the start of the next period, balance sheet accounts are known as:

Accepted Answer

A)  temporary accounts. 
B)  permanent accounts. 
C)  long-term accounts. 
D)  multi-period accounts. 
A)  temporary accounts. 
B)  permanent accounts. 
C)  long-term accounts. 
D)  multi-period accounts.

Question 7

What is the correct order for the steps in the closing process?
I Transfer the profit or loss to the owner's capital account
II Balance the owner's capital account
III Close the drawings account 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)  I, II, III, IV 
C)  IV, III, I, II 
D)  IV, III, II, I 
A)  III, IV, II, I 
B)  I, II, III, IV 
C)  IV, III, I, II 
D)  IV, III, II, I

Question 8

The major purpose of a post-closing trial balance is to:

Accepted Answer

A)  confirm that the adjusting entries are correct. 
B)  determine if any adjusting entries have been omitted. 
C)  test for equality of debits and credits in the general ledger to ensure the opening position is correct for the next period. 
D)  make sure that all post-closing account balances are equal to the pre-closing account balances. 
A)  confirm that the adjusting entries are correct. 
B)  determine if any adjusting entries have been omitted. 
C)  test for equality of debits and credits in the general ledger to ensure the opening position is correct for the next period. 
D)  make sure that all post-closing account balances are equal to the pre-closing account balances.

Question 9

Accounting entries made to reduce the temporary accounts to zero balances are known as:

Accepted Answer

A)  correcting entries. 
B)  adjusting entries. 
C)  reversing entries. 
D)  closing entries. 
A)  correcting entries. 
B)  adjusting entries. 
C)  reversing entries. 
D)  closing entries.

Question 10

Which of these is the correct treatment on the worksheet of the nominated item?

Accepted Answer

A)  For GST collection, credit the income statement and credit the balance sheet. 
B)  For depreciation, debit the balance sheet and credit the adjustments. 
C)  For profit earned, debit the income statement and credit the balance sheet. 
D)  For cash at bank, credit the adjustments and debit the balance sheet. 
A)  For GST collection, credit the income statement and credit the balance sheet. 
B)  For depreciation, debit the balance sheet and credit the adjustments. 
C)  For profit earned, debit the income statement and credit the balance sheet. 
D)  For cash at bank, credit the adjustments and debit the balance sheet.

Question 11

In accounting for a partnership separate capital and drawings accounts are maintained for each:

Accepted Answer

A)  shareholder. 
B)  partnership. 
C)  year. 
D)  partner. 
A)  shareholder. 
B)  partnership. 
C)  year. 
D)  partner.

Question 12

Accepted Answer

A)  Cash 110 000 Capital 110 000 
B)  Profit or loss summary 110 000 Capital 110 000 
C)  Capital 110 000 Cash 110 000 
D)  Capital 110 000 Profit or loss summary 110 000 
A)  Cash 110 000 Capital 110 000 
B)  Profit or loss summary 110 000 Capital 110 000 
C)  Capital 110 000 Cash 110 000 
D)  Capital 110 000 Profit or loss summary 110 000

Question 13

Which of these is not a permanent account?

Accepted Answer

A)  Prepaid rent 
B)  Rent expense 
C)  Accounts receivable 
D)  Owner's capital account 
A)  Prepaid rent 
B)  Rent expense 
C)  Accounts receivable 
D)  Owner's capital account

Question 14

Which of the following statements about closing entries is true?

Accepted Answer

A)  Closing entries are made at the end of each accounting period whatever its length. 
B)  Closing entries are only made at the end of the accounting year. 
C)  With computerised accounting systems there is no need to close off the expense and income accounts. 
D)  The profit or loss summary account is used regularly when processing transactions for sales and expenses. 
A)  Closing entries are made at the end of each accounting period whatever its length. 
B)  Closing entries are only made at the end of the accounting year. 
C)  With computerised accounting systems there is no need to close off the expense and income accounts. 
D)  The profit or loss summary account is used regularly when processing transactions for sales and expenses.

Question 15

What type of account is retained profits?

Accepted Answer

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

Question 16

Which of the following is the correct closing entry for a profit of $105 300?

Accepted Answer

A)  No closing entry is required 
B)  Debit profit or loss summary account $105 300; credit owner's capital account $105 300 
C)  Debit owner's capital account $105 300; credit profit or loss summary account $105 300 
D)  Debit owner's capital account $105 300; credit bank $105 300 
A)  No closing entry is required 
B)  Debit profit or loss summary account $105 300; credit owner's capital account $105 300 
C)  Debit owner's capital account $105 300; credit profit or loss summary account $105 300 
D)  Debit owner's capital account $105 300; credit bank $105 300

Question 17

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

Accepted Answer

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

Question 18

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

Accepted Answer

A)  They reverse the effect of credit transactions. 
B)  They reverse the effects of closing entries. 
C)  They reverse the effect of errors. 
D)  They reverse the effect of certain adjusting entries. 
A)  They reverse the effect of credit transactions. 
B)  They reverse the effects of closing entries. 
C)  They reverse the effect of errors. 
D)  They reverse the effect of certain adjusting entries.

Question 19

When closing the accounts of a partnership it is true that:

Accepted Answer

A)  partner's salaries must be treated as drawings because partners are owners. 
B)  a retained profits account is used rather than a profit or loss summary account. 
C)  profit is credited to each partner's capital account according to the profit sharing agreement. 
D)  a loss for the period is carried forward and is not transferred to the partner's capital accounts. 
A)  partner's salaries must be treated as drawings because partners are owners. 
B)  a retained profits account is used rather than a profit or loss summary account. 
C)  profit is credited to each partner's capital account according to the profit sharing agreement. 
D)  a loss for the period is carried forward and is not transferred to the partner's capital accounts.

Question 20

Which of these accounts is closed to the profit or loss summary account?

Accepted Answer

A)  GST outlays 
B)  Depreciation expense 
C)  Owner's drawings 
D)  Prepaid insurance 
A)  GST outlays 
B)  Depreciation expense 
C)  Owner's drawings 
D)  Prepaid insurance

Exam 5: Completing the Accounting Cycle Closing and Reversing Entries

In a company balance sheet, what are the two main categories equity is separated into?

The post-closing trial balance contains only:

The true statement is:

Which statement relating to closing entries is incorrect?

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

Because the balance at the end of one accounting period becomes the opening balance at the start of the next period, balance sheet accounts are known as:

The major purpose of a post-closing trial balance is to:

Accounting entries made to reduce the temporary accounts to zero balances are known as:

Which of these is the correct treatment on the worksheet of the nominated item?

In accounting for a partnership separate capital and drawings accounts are maintained for each:

Which of these is not a permanent account?

Which of the following statements about closing entries is true?

What type of account is retained profits?

Which of the following is the correct closing entry for a profit of $105 300?

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

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

When closing the accounts of a partnership it is true that:

Which of these accounts is closed to the profit or loss summary account?

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

Filters