Deck 4: Completion of the Accounting Cycle

Question 1

Correcting entries will only be done at the same time as the adjusting entries are being prepared.

Answer 1

False

Question 2

Closing entries are journalized after adjusting entries have been journalized.

Answer 2

True

Question 3

After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances.

Answer 3

True

Question 4

Cash is a temporary account and it should be zero after all closing entries have been posted.

Question 5

The final step in the accounting cycle is the pre-closing trial balance.

Question 6

The last three steps in the accounting cycle include prepare financial statements, journalize and post closing entries, and prepare a post-closing trial balance.

Question 7

Closing revenue and expense accounts to the Income Summary account is an optional bookkeeping procedure.

Question 8

The owner's drawings account is closed to the Income Summary account in order to properly determine profit (or loss) for the period.

Question 9

Closing the drawings account to Capital is NOT necessary if profit is greater than owner's drawings during the period.

Question 10

The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance.

Question 11

The owner's drawings account is a permanent account whose balance is carried forward to the next accounting period.

Question 12

In a post-closing trial balance the profit of the business will be one of the temporary accounts.

Question 13

A company has only one accounting cycle over its economic existence.

Question 14

Correcting entries are made any time an error is discovered even though it may NOT be at the end of an accounting period.

Question 15

The accounting cycle begins at the start of a new accounting period.

Question 16

Closing entries are an optional part of the accounting cycle.

Question 17

Closing entries are necessary if the business plans to continue operating in the future and issue financial statements each year.

Question 18

Reversing entries are an optional part of the accounting cycle.

Question 19

Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account.

Question 20

After the closing entries are posted to the accounts, a trial balance will show balances only in the Balance Sheet accounts.

Question 21

Long-term investments would appear in the property, plant, and equipment section of the balance sheet.

Question 22

If a company has a loss in the period, the amount of the loss will appear in the income statement credit column and the balance sheet debit column of the work sheet.

Question 23

An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does NOT require a correcting entry because total assets will NOT be misstated.

Question 24

The balance of the Depreciation Expense account will appear in the income statement debit column of a work sheet.

Question 25

Another name for Balance Sheet is the Statement of Financial Position.

Question 26

IFRS uses the alternate statement name of "Statement of Financial Position" in the written standards, whereas ASPE uses the name "Balance Sheet".

Question 27

Common Canadian practice shows current assets as the first items listed on a classified balance sheet.

Question 28

Cash and office supplies are both classified as current assets.

Question 29

If total credits in the income statement columns of a work sheet exceed total debits, the company has profit.

Question 30

The acid-test ratio is a measure of a company's long-term liquidity.

Question 31

Drawings will appear in the balance sheet debit column of a work sheet.

Question 32

The current ratio is the ratio of current liabilities divided by current assets.

Question 33

Sassy Hair Products has current assets of $26,000 and current liabilities of $16,500. Its current ratio is 0.6 to 1.

Question 34

The difference between current assets and current liabilities is called working capital.

Question 35

Abbott Manufacturing Company's current ratio is 2:1. The company has $50,000 in current liabilities; current assets must be $25,000.

Question 36

If a work sheet is used, financial statements can be prepared before adjusting entries are journalized.

Question 37

A liability is classified as a current liability if it is to be settled within one year from the balance sheet date or in the company's normal operating cycle.

Question 38

Current assets are normally listed in the balance sheet in order of permanency.

Question 39

All Canadian public companies must follow International Financial Reporting Standards.

Question 40

For entity's reporting under International Financial Reporting Standards, "non- current assets" is typically presented on the Balance Sheet

Question 41

When is a post-closing trial balance prepared?

A) when reversing entries are required
B) after adjusting entries but before closing entries
C) after both adjusting and closing entries have been posted
D) after the balance sheet has been prepared

Question 42

Closing entries are

A) an optional step in the accounting cycle.
B) posted to the ledger accounts from the work sheet.
C) made to close permanent or real accounts.
D) journalized in the general journal.

Question 43

Closing entries are made

A) in order to terminate the business as an operating entity.
B) so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts.
C) in order to transfer profit (or loss) and owner's drawings to the Owner's Capital account.
D) so that financial statements can be prepared.

Question 44

Reversing entries are used to reverse accrued revenues and expenses.

Question 45

In preparing closing entries

A) every revenue account will be credited.
B) every expense account will be credited.
C) the Owner's Capital account will be debited if there is profit for the period.
D) the Owner's Drawings account will be debited.

Question 46

Which of the following is an example of a temporary account that will be closed to Income Summary at the end of the accounting period?

A) Accumulated Depreciation
B) Land
C) Accounts Payable
D) Service Revenue

Question 47

To close the Depreciation Expense account

A) Income Summary is debited and Owner's Capital is credited.
B) Income Summary is debited and the Depreciation Expense is credited.
C) Income Summary is credited and the Owner's Capital is debited.
D) Income Summary is credited and the Depreciation Expense is debited.

Question 48

In order to close a revenue account, the

A) Income Summary account should be credited.
B) Income Summary account should be debited.
C) Owner's Drawings account should be credited.
D) Owner's Drawings account should be debited.

Question 49

Closing entries

A) are prepared before the financial statements.
B) reduce the number of permanent accounts.
C) cause the revenue and expense accounts to have zero balances.
D) close all of the permanent accounts.

Question 50

A reversing entry is made at the beginning of the next accounting period and is the exact opposite of the adjusting entry that was made in the previous period.

Question 51

Reversing entries are more relevant in corporations.

Question 52

Closing entries are journalized and posted

A) before the financial statements are prepared.
B) after the financial statements are prepared.
C) when the business is closing its doors.
D) at the end of each interim accounting period.

Question 53

The owner's capital account is

A) a permanent account.
B) closed to the owner's drawings account at the end of the accounting period.
C) closed to the Income Summary account at the end of the accounting period.
D) a temporary account.

Question 54

The closing entry process consists of closing

A) all asset and liability accounts.
B) out the Owner's Capital account.
C) all permanent accounts.
D) all temporary accounts.

Question 55

In order to close the Owner's Drawings account, the

A) Income Summary account should be debited.
B) Income Summary account should be credited.
C) Owner's Capital account should be credited.
D) Owner's Capital account should be debited.

Question 56

Which of the following is a true statement about closing the books of a proprietorship?

A) Expenses are closed to the owner's drawings account.
B) Only revenues are closed to the Income Summary account.
C) Only revenues and expenses are closed to the Income Summary account.
D) Revenues, expenses, and the owner's drawings account are closed to the Income Summary account.

Question 57

It is NOT necessary to prepare formal financial statements if a work sheet has been prepared because financial position and profit are shown on the work sheet.

Question 58

When all columns are in balance, the preparation of a work sheet will help ensure that no errors were made in the accounting records.

Question 59

Reversing entries are used to reverse adjusting entries originally recorded to account for the lapse of prepaid expenses.

Question 60

The adjustments on a work sheet can be posted directly to the accounts in the ledger from the work sheet.

Question 61

An error has occurred in the closing entry process if

A) all the revenue and expense accounts have zero balances.
B) the Owner's Capital account is credited for the amount of profit.
C) the Owner's Drawings account is closed to the Owner's Capital account.
D) all the balance sheet accounts have zero balances.

Question 62

Which of the following is the final step in the accounting cycle?

A) Journalize the transactions.
B) Post to ledger accounts.
C) Preparing a post-closing trial balance.
D) Journalize and post closing entries.

Question 63

Closing entries are journalized in the

A) trial balance.
B) general journal.
C) general ledger.
D) chart of accounts.

Question 64

Which one of the following is an optional step in the accounting cycle of a business enterprise?

A) Analyze business transactions.
B) Prepare a work sheet.
C) Prepare a trial balance.
D) Post to the ledger accounts.

Question 65

After closing entries are posted, the balance in the Owner's Capital account in the ledger will be equal to

A) the beginning Owner's Capital reported on the statement of owner's equity.
B) the amount of the Owner's Capital reported on the balance sheet.
C) zero.
D) the profit (or loss) for the period.

Question 66

The account used to temporarily hold the profit or loss before being transferred to the capital account is called

A) Income Summary account.
B) Closing account.
C) Drawings account.
D) Contra account.

Question 67

The balance in the Owner's Drawings account after all closing entries have been posted will be equal to

A) zero.
B) the profit (or loss) for the period.
C) the cash withdrawn by the owner during the period.
D) the balance in the Owner's Capital account.

Question 68

A post-closing trial balance will show

A) zero balances for all accounts.
B) zero balances for balance sheet accounts.
C) only balances for balance sheet accounts.
D) only balances for income statement accounts.

Question 69

A post-closing trial balance should be prepared

A) before closing entries are posted to the ledger accounts.
B) after closing entries are posted to the ledger accounts.
C) before adjusting entries are posted to the ledger accounts.
D) after adjusting entries are posted to the ledger accounts.

Question 70

The balances that appear on the post-closing trial balance will match the

A) income statement account balances after adjustments.
B) balance sheet account balances after closing entries.
C) income statement account balances after closing entries.
D) balance sheet account balances after adjustments.

Question 71

The first required step in the accounting cycle is

A) reversing entries.
B) journalizing transactions in the book of original entry.
C) analyzing transactions.
D) posting transactions.

Question 72

Which of the following steps in the accounting cycle may be performed more frequently than annually?

A) Prepare a post-closing trial balance.
B) Journalize closing entries.
C) Post closing entries.
D) Prepare a trial balance.

Question 73

The two optional steps in the accounting cycle are preparing

A) a post-closing trial balance and reversing entries.
B) a work sheet and post-closing trial balances.
C) reversing entries and a work sheet.
D) an adjusted trial balance and a post-closing trial balance.

Question 74

A post-closing trial balance will show

A) only permanent account balances.
B) only temporary account balances.
C) zero balances for all accounts.
D) the amount of profit (or loss) for the period.

Question 75

The heading for a post-closing trial balance has a date line that is similar to the one found on

A) a balance sheet.
B) an income statement.
C) a statement of owner's equity.
D) the work sheet.

Question 76

Which of the following steps in the accounting cycle would NOT generally be performed daily?

A) Journalize transactions.
B) Post to ledger accounts.
C) Prepare adjusting entries.
D) Analyze business transactions.

Question 77

Which of the following depicts the proper sequence of steps in the accounting cycle?

A) journalize the transactions, analyze business transactions, prepare a trial balance
B) prepare a trial balance, prepare financial statements, prepare adjusting entries
C) prepare a trial balance, prepare adjusting entries, prepare financial statements
D) prepare a trial balance, post to ledger accounts, post adjusting entries

Question 78

Assets, liabilities, and equity accounts are considered

A) temporary accounts.
B) closing accounts.
C) permanent accounts.
D) contra accounts.

Question 79

The final step in the accounting cycle is to prepare

A) closing entries.
B) financial statements.
C) a post-closing trial balance.
D) adjusting entries.

Question 80

The purpose of the post-closing trial balance is to

A) ensure that all adjusting entries were made.
B) prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
C) prove the equality of the income statement account balances that are carried forward into the next accounting period.
D) list all the balance sheet accounts in alphabetical order for easy reference.