Deck 4: Completing the Accounting Cycle

Question 1

Prepaid Insurance is an example of a current asset.

Answer 1

True

Question 2

Land is an example of a plant asset.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

At the end of the fiscal period, prepaid expenses are reported on the income statement as expenses.

Question 6

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

Question 7

When accounts do appear on the unadjusted trial balance but are needed to post adjustments, they are simply added to the account title column.

Question 8

The usual presentation of the statement of owner's equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner's contributions, (5) Ending capital.

Question 9

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

Question 10

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 11

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

Question 12

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 13

There is really benefit in preparing financial statements in any particular order.

Question 14

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

Question 15

Office Equipment is an example of a current asset account.

Question 16

Round tripping is a fraudulent scheme where business A artificially inflates revenue by lending money to customer B who uses that money to buy products from
A.

Question 17

Capital and Drawing are reported in the owner's equity section of the balance sheet.

Question 18

The difference between a classified balance sheet and one that is classified is that the classified one has subheadings.

Question 19

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

Question 20

The work sheet is considered a part of the formal accounting records.

Question 21

The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet.

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire.

Question 28

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

Question 29

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

Question 30

Accumulated Depreciation is a permanent account.

Question 31

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

Question 32

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

Question 33

The income summary account is closed to the owner's capital account.

Question 34

The drawing account is closed to the income summary account.

Question 35

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

Question 36

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

Question 37

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

Question 38

The drawing account is a temporary account.

Question 39

Closing entries are entered directly on to the work sheet.

Question 40

The accumulated depreciation account is closed to the income summary account.

Question 41

The work sheet is a working paper that accountants can use to summarize adjusting entries and the account balances for the financial statements.

Question 42

Any twelve-month accounting period adopted by a company is known as its fiscal year.

Question 43

A fiscal year that ends when business activities have reached their lowest point is called the natural business year.

Question 44

The totals of the Adjusted Trial Balance columns on a work sheet will always be the sum of the Trial Balance column totals and the Adjustments column totals.

Question 45

In a computerized accounting system, a work sheet may be necessary because the software program automatically posts entries to the accounts and prepares financial statements.

Question 46

The trial balance may be listed on the work sheet instead of being prepared separately.

Question 47

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

Question 48

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 49

All companies must use a calendar year as their fiscal year.

Question 50

Assets, liabilities, and owner's capital are real accounts and do get closed at the end of the period.

Question 51

The accounting cycle begins with preparing an unadjusted trial balance.

Question 52

The income summary account is also known as the clearing account.

Question 53

The balances of the capital accounts from the Adjusted Trial Balance of the work sheet are extended to the Statement of Owner's Equity columns.

Question 54

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

Question 55

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

Question 56

Balance Sheet accounts are considered real accounts.

Question 57

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

Question 58

The majority of businesses end their fiscal year on December 31.

Question 59

It is necessary to post the closing entries to the general ledger.

Question 60

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

Question 61

Real accounts are permanent accounts.

Question 62

A work sheet heading is dated for a period of time.

Question 63

The balance in the capital account on the worksheet will equal the amount presented in the balance sheet.

Question 64

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

Question 65

After Net Income or Loss is entered on the work sheet, the debit column total must equal the credit column total for the Balance Sheet pair of columns.

Question 66

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 owner's 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 67

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 68

On the work sheet, the capital and drawing account balances are extended to the Balance Sheet columns.

Question 69

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

Question 70

Since the adjustments are entered on the work sheet, it is necessary to record them in the journal or post them to the ledger.

Question 71

If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000.

Question 72

When preparing the statement of owner's equity, the beginning capital balance can always be found

A) in the Income Statement columns of the work sheet
B) in the statement of cash flows
C) in the general ledger
D) in the Balance Sheet columns of the work sheet

Question 73

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

Question 74

A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the Balance Sheet columns.

Question 75

In the accounting cycle, the last step is

A) preparing the financial statements
B) journalizing and posting the adjusting entries
C) preparing a post-closing trial balance
D) journalizing and posting the closing entries

Question 76

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 77

During the end-of-period processing which of the following best describes the logical order of this process

A) Preparation of adjustments, adjusted trial balance, financial statements
B) Preparation of Income Statement, adjusted trial balance, Balance Sheet
C) Preparation of adjusted trial balance, cross-referencing, journalizing
D) Preparation of adjustments, adjusted trial balance, posting

Question 78

Net income is shown on the work sheet in the Income Statement debit column and the Balance Sheet credit column.

Question 79

The worksheet and the financial statements both require dollar signs.

Question 80

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