Deck 4: Completing the Accounting Cycle

Question 1

A revenue account is closed with a credit to the revenue account and a debit to Income Summary.

Answer 1

False

Question 2

Permanent accounts are also known as real accounts.

Answer 2

True

Question 3

The term post means entering transactions into the journal.

Answer 3

False

Question 4

The only accounts that are closed are income statement accounts.

Question 5

Financial statements cannot be prepared correctly until the accounts have been adjusted.

Question 6

Accounts Receivable is a real account.

Question 7

Adjusting the accounts is part of the processing stage of the accounting cycle.

Question 8

Cash is a nominal account.

Question 9

Nominal account balances are reduced to zero by closing entries.

Question 10

Closing entries result in the transfer of net income or net loss into the owner's Capital account.

Question 11

In the accounting cycle, closing entries are prepared before adjusting entries.

Question 12

After all closing entries have been entered and posted, the balance of the Income Summary account will be zero.

Question 13

Closing entries deal primarily with the balances of real accounts.

Question 14

An expense account is closed with a debit to the expense account and a credit to Income Summary.

Question 15

Trial balances are prepared primarily to ensure that no entries have been omitted.

Question 16

A temporary account is also known as a nominal account.

Question 17

Supplies Expense is a temporary account.

Question 18

In the accounting cycle, information from source documents is initially recorded in the journal.

Question 19

Analyzing business transactions from source documents constitutes the communication stage of the accounting cycle.

Question 20

Depreciation Expense-Buildings is a permanent account.

Question 21

Owner's Capital is closed by transferring the balance to Income Summary.

Question 22

Income Summary is closed with a debit to Income Summary and a credit to the Withdrawals account.

Question 23

The balances of all the accounts that appear on a balance sheet are the same on the adjusted trial balance as they are on a post-closing trial balance.

Question 24

There is sufficient information on a post-closing trial balance to prepare a balance sheet.

Question 25

When net income is exactly zero, one of the usual closing entries can be avoided.

Question 26

During the closing process, expenses are transferred to the credit side of the Income Summary account.

Question 27

Reversing entries can be made for deferrals but not for accruals.

Question 28

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

Question 29

The post-closing trial balance will contain only real accounts.

Question 30

The Withdrawals account bypasses the Income Summary account when it is being closed.

Question 31

The Income Summary account will appear on the post-closing trial balance.

Question 32

During the closing process, revenues are transferred to the credit side of the Income Summary account.

Question 33

Reversing entries are made to correct errors in the accounts.

Question 34

There is sufficient information on a post-closing trial balance to prepare a statement of owner's equity.

Question 35

The Income Summary account appears in the income statement.

Question 36

The adjusting entries involving Depreciation Expense-Buildings and Supplies Expense could be reversed.

Question 37

A reversing entry will include either a debit to a revenue account or a credit to an expense account.

Question 38

There is sufficient information on a post-closing trial balance to prepare an income statement.

Question 39

Reversing entries are never required.

Question 40

The adjusting entries involving Rent Receivable and Salaries Payable could be reversed.

Question 41

When the Income Statement columns of the work sheet are initially footed, they should be out of balance by the amount of net income or net loss.

Question 42

The amount placed opposite the owner's Capital account in the Balance Sheet columns of the work sheet is the amount to be reflected for owner's Capital on the balance sheet.

Question 43

The amount for the Withdrawals account will appear in the Income Statement columns of a work sheet.

Question 44

The heading of a work sheet might contain the line "As of February 28, 20xx."

Question 45

Working papers provide a written record of the work performed by the accountant or auditor.

Question 46

On a work sheet, the balance of the owner's Capital account is its ending amount for the period.

Question 47

The work sheet is prepared after the formal adjusting and closing entries.

Question 48

The work sheet should be prepared after the formal financial statements have been prepared.

Question 49

The work sheet is published in the annual report along with the financial statements.

Question 50

A work sheet is more useful for a small company than for a large one.

Question 51

The purpose of reversing entries is to simplify the bookkeeping process.

Question 52

The work sheet is a type of accountant's working paper.

Question 53

When the Balance Sheet columns of the work sheet are initially footed, they should be in balance.

Question 54

The balances of the Accumulated Depreciation accounts will appear on the credit side of the work sheet's Balance Sheet columns.

Question 55

The Adjusted Trial Balance columns of the work sheet are prepared by combining the Trial Balance and Adjustments columns of the work sheet.

Question 56

An important use of the work sheet is as an aid in the preparation of financial statements.

Question 57

The process of crossfooting requires vertical addition and subtraction.

Question 58

Despite the many uses of microcomputers, they cannot be used to prepare work sheets.

Question 59

When adjusting entries are entered onto a work sheet, it is not necessary to record them in the general journal.

Question 60

Adjusting entries are all dated as of the first day of the new accounting period.

Question 61

Which of the following accounts is not closed during the closing process?

A) Owner's Capital
B) Commissions Earned
C) Income Summary.
D) Withdrawals

Question 62

In the accounting cycle, which of the following involves the measurement stage?

A) Analyzing the business transactions from source documents
B) Posting journal entries to the ledger
C) Preparing the financial statements
D) Adjusting the accounts

Question 63

The total assets and the total liabilities and owner's equity on the balance sheet are the same as the totals of the Balance Sheet columns on the work sheet.

Question 64

Closing entries ultimately will affect

A) total liabilities.
B) the Cash account.
C) the owner's Capital account.
D) total assets.

Question 65

Which of the following sequences of documents or records describes the proper sequence in the accounting cycle?

A) Source documents, journal, ledger, financial statements
B) Source documents, ledger, journal, financial statements
C) Ledger, source documents, journal, financial statements
D) Journal, source documents, ledger, financial statements

Question 66

Which of the following is not a permanent account?

A) Supplies
B) Accounts Receivable
C) Owner's Capital
D) Depreciation Expense-Buildings

Question 67

Which of the following sequences of actions describes the proper sequence in the accounting cycle?

A) Prepare, record, post, adjust, analyze, close
B) Post, close, prepare, adjust, analyze, record
C) Analyze, record, post, adjust, prepare, close
D) Record, post, close, prepare, adjust, analyze

Question 68

An important purpose of closing entries is to

A) set nominal account balances to zero to begin the next period.
B) adjust the accounts in the ledger.
C) help in preparing financial statements.
D) set real account balances to zero to begin the next period.

Question 69

Which of the following is not a temporary account?

A) Depreciation Expense-Vehicles
B) Service Revenue
C) Accumulated Depreciation-Vehicles
D) Interest Income

Question 70

On which financial statement does Income Summary appear?

A) Statement of owner's equity
B) Balance sheet
C) On no financial statement
D) Income statement

Question 71

Which of the following steps is the first step in accounting cycle?

A) The financial statements are prepared.
B) Source documents are analyzed.
C) Adjusting entries are recorded and posted.
D) Closing entries are recorded and posted.

Question 72

Which of the following steps is the last step in accounting cycle?

A) Adjusting entries are recorded and posted.
B) Source documents are analyzed.
C) The financial statements are prepared.
D) Entries are recorded in the journal.

Question 73

Adjusting entries, like any other entries, are posted to the ledger.

Question 74

Which of the following is a nominal account?

A) Interest Payable
B) Property Taxes Expense
C) Owner's Capital
D) Cash

Question 75

Which of the following accounts is a real account?

A) Building
B) Depreciation Expense-Buildings
C) Interest Expense
D) Service Revenue

Question 76

Failure to prepare closing entries will produce a misstated

A) total liabilities figure on the balance sheet.
B) total assets figure on the balance sheet.
C) owner's Capital account balance.
D) Income Summary account balance.

Question 77

An important purpose of closing entries is to

A) help achieve the goals of the matching principle.
B) set permanent account balances to zero to begin the next period.
C) update the nominal accounts at year end.
D) transfer net income or net loss to the owner's Capital account.

Question 78

Closing entries can be prepared by referring solely to the Income Statement columns of the work sheet.

Question 79

The amount of the Withdrawals account can be found on the work sheet.

Question 80

The process of posting is associated most closely with the

A) ledger.
B) source documents.
C) financial statements.
D) work sheet.