Deck 5: Completing the Accounting Cycle

Question 1

End of year records from Abbi's Boutique show: $$\begin{array} { l r } & \$ \\\text { Cash } & 20 \\\text { GST Outlays } & 35 \\\text { Salaries Payable } & 10 \\\text { Rent Expense } & 100 \\\text { Interest Expense } & 50 \\\text { Prepaid Rent } & 30 \\\text { Salary Expense } & 20 \\\text { Rent Collected in Advance } & 20\end{array}$$ During the closing process the total debit to the Profit and Loss Summary account would be:

A)$90
B)$170
C)$80
D)$110

Answer 1

$170

Question 2

In the closing process which accounts are closed?

A)All ledger accounts
B)All asset,liability and equity accounts
C)All income and expense accounts
D)All accounts that have been adjusted

Answer 2

C

Question 3

Interim statements are:

A)Summary statements
B)Prepared by junior staff when the accountant is busy
C)Prepared between the annual reports,usually half-yearly,quarterly or monthly
D)Used by creditors to deal with an emergency

Answer 3

C

Question 4

This is Kululu's year-end trial balance: $$\begin{array} { l c } & \$ \\\text { Cash } & 50 \\\text { Sales Revenue } & 80 \\\text { Accounts Payable } & 30 \\\text { Equity } & 70 \\\text { Interest Expense } & 60 \\\text { Interest Receivable } & 50 \\\text { Interest Revenue } & 40\end{array}$$ How many of the above are temporary accounts?

A)One
B)Two
C)Three
D)Four

Question 5

What is the closing entry for drawings of $25 000?

A)No closing entry is required
B)Debit profit and loss summary account $25 000; credit drawings $25 000
C)Debit bank $25 000; credit drawings $25 000
D)Debit owner's capital account $25 000; credit drawings $25 000

Question 6

Closing the accounts refers to:

A)Establishing zero balances in the balance sheet accounts
B)Establishing a zero balance in the cash at bank account
C)Establishing zero balances in all ledger accounts
D)Transferring income and expense account balances to the profit and loss summary account,which is then closed to the equity account

Question 7

Closing entries are made:

A)In the ledger only
B)In the journal and the ledger
C)In the journal only
D)On the worksheet

Question 8

Which of these is not recorded on a worksheet?

A)Closing entries
B)Drawings
C)Adjusting entries
D)Profit for the period

Question 9

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

A)Prepare the accounting reports
B)Confirm that the ledger is in balance at the start of the new accounting period
C)Determine if any closing entries have been missed
D)Determine if any adjusting entries have been missed

Question 10

Before calculating the profit for the period,the totals of the income statement debit and credit columns on the worksheet are $60 000 and $80 000 respectively.What is the amount of the profit or loss?

A)$20 000 profit
B)$20 000 loss
C)$80 000 profit
D)$60 000 loss

Question 11

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

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

Question 12

The balance in the Profit and Loss Summary account before it is closed represents:

A)Total income
B)Total expense
C)Profit or loss
D)Profit or loss less cash drawings

Question 13

Closing which of these accounts results in a credit to the Profit and Loss Summary account?

A)Sales
B)Depreciation
C)Rent Expense
D)Drawings

Question 14

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

A)Correcting entries
B)Adjusting entries
C)Closing entries
D)Reversing entries

Question 15

On a worksheet if the opening balance of the salaries expenses account was $7000,a reversing entry for $800 was completed for salaries accrued in the previous year and $600 of salaries were prepaid in the current year the balance of salaries expense transferred to the Income statement column would be:

A)$6,800
B)$7,200
C)$8,400
D)$5,600

Question 16

Income and expense accounts can be referred to as:

A)Permanent accounts
B)Real accounts
C)Temporary accounts
D)Deferred accounts

Question 17

Which statement relating to closing entries is incorrect?

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 18

Which of these is not a permanent account?

A)Prepaid insurance
B)Rent expense
C)Loan
D)Owner's capital account

Question 19

If cleaning expenses for the year are $8 200,made up of cash payments of $7 900 and accrued cleaning of $300 what is the amount of cleaning that is closed to the profit and loss summary account?

A)Nil
B)$300
C)$7 900
D)$8 200

Question 20

The correct closing entry for a profit of $105 300 is:

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

Question 21

A d_________________ is a distribution of cash by a company to its shareholders.

Question 22

After the closing entries have been posted,the t_______________ accounts will have zero balances.

Question 23

The financial statements of sole proprietorships,partnerships and companies are essentially the same except for transactions that directly affect e____________ accounts.

Question 24

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

A)Partner's salaries must be treated as drawings because partners are owners
B)A retained profits account is used rather than a profit and 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 25

The accounting entries made to close the temporary accounts are called ___________________ entries.

Question 26

The statement relating to reversing entries that is correct is:

A)Reversing entries are always necessary
B)There are alternative ways of dealing with the effect of accruals in subsequent periods without using reversing entries.
C)Reversing entries are never appropriate for deferral type entries
D)Depreciation is an adjustment that requires reversing in the subsequent period

Question 27

The post closing trial balance contains only:

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

Question 28

Monthly financial statements prepared during the year are called i________________ statements.

Question 29

In the closing process the balances of the income and expense accounts are closed off to the _______ and _____ summary account.

Question 30

If expenses exceed income,before it is closed,the Profit and Loss Summary account will have a debit/credit balance.

Question 31

The retained profits balance of Go Company was $50 000 on the first day of the year.Profit during the year was $20 000.Near year-end a $10 000 dividend was declared that is to be paid in the following year.Year-end retained profits are:

A)$70 000
B)$60 000
C)$50 000
D)$40 000

Question 32

R__________________ entries are made on the first day of the next financial year to undo the effects of certain adjusting entries.

Question 33

The statement relating to reversing entries that is correct is:

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

Question 34

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

A)Verify the worksheet calculations
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 35

Dividends require two accounting entries,one when the dividend is declared and another when it is paid.What is the correct entry to record the declaration of a cash dividend of 20c a share calculated on 100 000 shares?

A)Debit bank $20 000; credit dividend payable $20 000
B)Debit retained profits $20 000; credit dividend payable $20 000
C)Debit bank $20 000; credit share capital $20 000
D)Debit dividend payable $20 000; credit retained profits $20 000

Question 36

The post-closing trial balance should contain only b____________ s________ accounts.

Question 37

In a company balance sheet equity is separated into two main categories:

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

Question 38

The statement relating to the Profit and Loss Summary Account that is incorrect is:

A)The balance in each income and expense account is transferred to the Profit and Loss Summary Account
B)The balance in the Profit and Loss Summary Account is transferred to the owner's Capital account
C)The Profit and Loss Summary Account is established to summarise the balances in the income and expense accounts
D)The Profit and loss Summary Account is a permanent account

Question 39

Balance sheet accounts are known as permanent accounts and income statement accounts are known as t________________ accounts.

Question 40

On 1 January Y Company Pty Ltd issued 100 000 shares for $2 each.The correct entry to record this transaction is:

A)Debit bank $200 000; credit shareholder's equity $200 000
B)Debit bank $200 000; credit share capital $200 000
C)Debit bank $100 000; credit share capital $100 000
D)Debit share capital $100 000; credit bank $100 000