Deck 4: The Accounting Cycle

Question 1

On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount.

Answer 1

True

Question 2

There is really no benefit in preparing financial statements in any particular order.

Answer 2

False

Question 3

The amount of the net income for a period appears on both the income statement and the balance sheet for that period.

Answer 3

False

Question 4

Accrued expenses are ordinarily listed on the balance sheet as current assets.

Question 5

Common stock and dividends are reported in the stockholders' equity section of the balance sheet.

Question 6

After analyzing transactions, the next step would be to post the transactions in the ledger.

Question 7

Liabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities.

Question 8

Prepaid expenses that benefit a relatively short period of time are listed on the balance sheet as current assets.

Question 9

Prepaid Insurance is an example of a current asset.

Question 10

Land is an example of a plant asset.

Question 11

Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets.

Question 12

When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are simply added to the account title column.

Question 13

The usual presentation of the retained earnings statement is (1) Beginning balance, (2) Net income or loss, (3) Dividends, (4) Stockholders' investments, (5) Ending balance.

Question 14

Cross-referencing is useful in assuring that the debits and credits are in balance.

Question 15

Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements.

Question 16

Accrued taxes payable are generally reported on the balance sheet as a current liability.

Question 17

Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets.

Question 18

The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.

Question 19

Office Equipment is an example of a current asset account.

Question 20

Accrued revenues are ordinarily listed on the balance sheet as current liabilities.

Question 21

During the closing process, some balance sheet accounts are closed and end the period with a zero balance.

Question 22

All income statement accounts will be closed at the end of the period.

Question 23

A post-closing trial balance should be prepared before the financial statements are prepared.

Question 24

Accounts reported on the balance sheet that are carried forward from year to year are known as permanent accounts.

Question 25

The balance sheet accounts are referred to as real or permanent accounts.

Question 26

Entries required to close the balances of the temporary accounts at the end of the period are called final entries.

Question 27

Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period.

Question 28

The dividends account is a permanent account.

Question 29

The dividends account is closed to the common stock account.

Question 30

Examples of temporary accounts are Supplies and Prepaid Expenses, which are in the ledger for just a short time before they expire.

Question 31

During closing, revenue accounts are closed by debiting the revenue account and crediting the retained earnings account.

Question 32

The post-closing trial balance will generally have fewer accounts than the trial balance.

Question 33

Closing entries are entered directly on the end-of-period spreadsheet.

Question 34

The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance.

Question 35

The dividends account is a temporary account.

Question 36

Assets, liabilities, and stockholders' equity accounts are real accounts and do not get closed at the end of the period.

Question 37

The accumulated depreciation account is closed to the retained earnings account.

Question 38

Journalizing and posting closing entries must be completed before financial statements can be prepared.

Question 39

A post-closing trial balance contains only asset and liability accounts.

Question 40

Accumulated Depreciation is a permanent account.

Question 41

The last step of the accounting cycle is to prepare a post-closing trial balance.

Question 42

Financial statements should be prepared before the closing entries are journalized and posted.

Question 43

The income statement is prepared from the adjusted trial balance or the Income Statement columns of the end-of-period spreadsheet.

Question 44

The end-of-period spreadsheet is a tool that accountants can use to summarize adjusting entries and the account balances for the financial statements.

Question 45

The most important output of the accounting cycle is the financial statements.

Question 46

Once an account has been closed for the period, inserting a line in the balance columns zeros out the account, making it ready for the following period.

Question 47

This question has been removed by Cengage.

Question 48

Balance sheet accounts are not considered real accounts.

Question 49

The balances of the equity accounts from the Adjusted Trial Balance of the end-of-period spreadsheet are extended to the statement of stockholders' equity columns.

Question 50

The trial balance may be listed on the end-of-period spreadsheet instead of being prepared separately.

Question 51

It is not necessary to post the closing entries to the general ledger.

Question 52

The accounting cycle begins with preparing an unadjusted trial balance.

Question 53

The end-of-period spreadsheet is not considered a part of the formal accounting records.

Question 54

The closing process is sometimes referred to as closing the books.

Question 55

Real accounts are not permanent accounts.

Question 56

This question has been removed by Cengage.

Question 57

This question has been removed by Cengage.

Question 58

An end-of-period spreadsheet heading is dated for a period of time.

Question 59

The totals of the Adjusted Trial Balance columns on an end-of-period spreadsheet will always be the sum of the Trial Balance column totals and the Adjustments column totals.

Question 60

The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period.

Question 61

Since the adjustments are entered on the end-of-period spreadsheet, it is not necessary to record them in the journal or post them to the ledger.

Question 62

Accumulated Depreciation appears on the

A)balance sheet in the current assets section
B)balance sheet in the property, plant, and equipment section
C)balance sheet in the long-term liabilities section
D)income statement as an operating expense

Question 63

If the totals of the Income Statement Debit and Credit columns of an end-of-period spreadsheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000.

Question 64

The first item appearing on the statement of stockholders' equity is

A)net income
B)the ending balance of retained earnings
C)dividends
D)the beginning balance of retained earnings

Question 65

Prepaid insurance is reported on the balance sheet as a

A)current asset
B)fixed asset
C)current liability
D)long-term liability

Question 66

What is the major difference between the unadjusted trial balance and the adjusted trial balance?

A)The adjusted trial balance will show the net income (loss) as an additional account.
B)Unlike the adjusted trial balance, the unadjusted trial balance will continue with the end-of-period processing even if it is not in balance.
C)The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts.
D)The adjusted trial balance will be used to record the adjustments for the period.

Question 67

Which one of the fixed asset accounts listed below will not have a related contra asset account?

A)Office Equipment
B)Land
C)Delivery Equipment
D)Building

Question 68

The current ratio is more useful than working capital in comparing across companies or with industry averages.

Question 69

The chart of accounts, the journal, and the ledger are essential parts of the accounting system.

Question 70

Once the adjusting entries are posted, the adjusted trial balance is prepared to

A)verify that the debits and credits are in balance
B)verify that the net income correctly flows into the statement of stockholders' equity from the income statement
C)verify that the net income (loss) is correct for the period
D)verify the correct flow of accounts into the financial statements

Question 71

A reversing entry recorded on the first day of the current accounting period is exactly the same as the related adjusting entry from the last day of the prior accounting period.

Question 72

After Net Income or Loss is entered on the end-of-period spreadsheet, the debit column total must equal the credit column total for the Balance Sheet pair of columns.

Question 73

The statement of stockholders' equity should be prepared

A)before the income statement and after the balance sheet
B)before the income statement and balance sheet
C)after the income statement and balance sheet
D)after the income statement and before the balance sheet

Question 74

A net loss is shown on the end-of-period spreadsheet in the credit columns of both the Income Statement columns and the Balance Sheet columns.

Question 75

On the end-of-period spreadsheet, the common stock and dividends account balances are extended to the Balance Sheet columns.

Question 76

Net income is shown on the end-of-period spreadsheet in the Income Statement debit column and the Balance Sheet credit column.

Question 77

Working capital is the ratio of the current assets of a business to its current liabilities.

Question 78

After the account balances have been extended from the Adjusted Trial Balance columns on the end-of-period spreadsheet, the difference between the initial totals of the Balance Sheet debit and credit columns is Net Income or Net Loss.

Question 79

Notes receivable due in 390 days appear on the

A)balance sheet in the current assets section
B)balance sheet in the noncurrent assets section
C)balance sheet in the current liabilities section
D)income statement as an expense

Question 80

Unearned Fees appear on the

A)balance sheet in the current assets section
B)balance sheet as a current liability
C)balance sheet in the stockholders' equity section
D)income statement as revenue