Deck 4: Completing the Accounting Cycle

Question 1

The Dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period.

Answer 1

False

Question 2

The balance of the depreciation expense account will appear in the income statement debit column of a worksheet.

Answer 2

True

Question 3

No permanent account balances are changed in the closing process.

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

Closing the Dividends account to Retained Earnings is not necessary if net income is greater than dividends paid during the period.

Question 8

The post-closing trial balance is entered in the first two columns of a worksheet.

Question 9

The Dividends account is a permanent account whose balance is carried forward to the next accounting period.

Question 10

The adjusted trial balance columns of a worksheet are obtained by subtracting the adjustment columns from the trial balance columns.

Question 11

It is not necessary to prepare formal financial statements if a worksheet has been prepared because financial position and net income are shown on the worksheet.

Question 12

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

Question 13

The last 2 columns on a worksheet prepared under IFRS contains data for the Retained Earnings Statements.

Question 14

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

Question 15

If total credits in the income statement columns of a worksheet exceed total debits, the enterprise has net income.

Question 16

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

Question 17

The format of the data in the Statement of Financial Position columns of the worksheet is the same as the format of the Statement of Financial Position.

Question 18

Closing entries are journalized after adjusting entries have been journalized.

Question 19

The procedures used to prepare the worksheet are the same under both IFRS and GAAP.

Question 20

A worksheet is a mandatory form that must be prepared along with an income statement and statement of financial position.

Question 21

Cash and office supplies are both classified as current assets.

Question 22

Long-term investments would appear in the property, plant, and equipment section of the statement of financial position.

Question 23

A company's operating cycle and fiscal year are usually the same length of time.

Question 24

Step number 6 in the accounting cycle includes preparation of the Statement of Financial Position.

Question 25

A liability is classified as a current liability if the company is to pay it within the forthcoming year.

Question 26

The preparation of a Statement of Financial Position is a required step in the accounting cycle.

Question 27

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

Question 28

The operating cycle of a company is determined by the number of years the company has been operating.

Question 29

IFRS permits the noncurrent classifications to be reported before the current classifications on the statement of financial position

Question 30

The post-closing trial balance only contains Statement of Financial Position account balances.

Question 31

Correcting entries will never affect statement of financial position accounts.

Question 32

The purpose of the post-closing trial balances is to prove the equality of the Statement of Financial Position.

Question 33

A company's liquidity is concerned with the relationship between long-term investments and long-term debt.

Question 34

Both correcting entries and adjusting entries always affect at least one statement of financial position account and one income statement account.

Question 35

A business entity has only one accounting cycle over its economic existence.

Question 36

Intangible assets are customarily the first items listed on a classified statement of financial position.

Question 37

The order of the accounts in the post-closing trial balance is the same order as the accounts appearing in the Statement of Financial Position.

Question 38

Current assets are the first category of assets reported on the Statement of Financial Position.

Question 39

IFRS requires that current assets be reported on the statement of financial position in the order of their liquidity.

Question 40

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 41

Current assets are listed in the reverse order of liquidity.

Question 42

After a worksheet has been completed, the statement columns contain all data that are required for the preparation of financial statements.

Question 43

Reversing entries are an optional bookkeeping procedure.

Question 44

The information for preparing a trial balance on a worksheet is obtained from

A) financial statements.
B) general ledger accounts.
C) general journal entries.
D) business documents.

Question 45

A worksheet can be thought of as a(n)

A) permanent accounting record.
B) optional device used by accountants.
C) part of the general ledger.
D) part of the journal.

Question 46

Preparing a worksheet involves

A) two steps.
B) three steps.
C) four steps.
D) five steps.

Question 47

In one closing entry, the Dividends account is credited and Income Summary is debited.

Question 48

Computing net income on the worksheet occurs in step

A) two.
B) three.
C) four.
D) five.

Question 49

When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger. Where should these additional accounts be shown on the worksheet?

A) They should be inserted in alphabetical order into the trial balance accounts already given.
B) They should be inserted in chart of account order into the trial balance already given.
C) They should be inserted on the lines immediately below the trial balance totals.
D) They should not be inserted on the trial balance until the next accounting period.

Question 50

Current liabilities are obligations that the company is to pay within the coming year.

Question 51

The post-closing trial balance will contain only statement of equity accounts and statement of financial position accounts.

Question 52

The use of reversing entries will change the amounts reported in the statement of financial position.

Question 53

After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the

A) adjusted trial balance.
B) post-closing trial balance.
C) the general journal.
D) adjustments columns of the worksheet.

Question 54

A worksheet is a multiple column form that facilitates the

A) identification of events.
B) measurement process.
C) preparation of financial statements.
D) analysis process.

Question 55

The operating cycle of a company is the average time required to collect the receivables resulting from producing revenues.

Question 56

To close net income to Retained Earnings Income Summary is debited and Retained Earnings is credited.

Question 57

The adjustments entered in the adjustments columns of a worksheet are

A) not journalized.
B) posted to the ledger but not journalized.
C) not journalized until after the financial statements are prepared.
D) journalized before the worksheet is completed.

Question 58

Reversing entries will always affect statement of financial position accounts.

Question 59

The Supplies account appears in which of the following debit columns of the worksheet?

A) Trial balance
B) Adjusted trial balance
C) Statement of financial position
D) All of these answer choices are correct.

Question 60

If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has

A) earned net income for the period.
B) an error because debits do not equal credits.
C) suffered a net loss for the period.
D) to make an adjusting entry.

Question 61

Closing entries are made

A) in order to terminate the business as an operating entity.
B) so that all assets, liabilities, and equity accounts will have zero balances when the next accounting period starts.
C) in order to transfer net income (or loss) and dividends to Retained Earnings.
D) so that financial statements can be prepared.

Question 62

Use the following data, taken from the adjusted trial balance, for 70 and 71.
What will be the total of the Statement of Financial Position credit column?

A) €12,224
B) €8,160
C) €11,988
D) €8,396

Question 63

The income statement and statement of financial position columns of Reed Company's worksheet reflect the following totals: To enter the net income (or loss) for the period into the above worksheet requires an entry to the

A) income statement debit column and the statement of financial position credit column.
B) income statement credit column and the statement of financial position debit column.
C) income statement debit column and the income statement credit column.
D) statement of financial position debit column and the statement of financial position credit column.

Question 64

The income statement and statement of financial position columns of Reed Company's worksheet reflect the following totals: The net income (or loss) for the period is

A) $45,000 income.
B) $13,000 income.
C) $13,000 loss.
D) not determinable.

Question 65

Each of the following accounts is closed to Income Summary except

A) Expenses.
B) Dividends.
C) Revenues.
D) All of these answer choices are correct.

Question 66

If the total debits exceed total credits in the statement of financial position columns of the worksheet, equity

A) will increase because net income has occurred.
B) will decrease because a net loss has occurred.
C) is in error because a mistake has occurred.
D) will not be affected.

Question 67

Closing entries are necessary for

A) permanent accounts only.
B) temporary accounts only.
C) both permanent and temporary accounts.
D) permanent or real accounts only.

Question 68

The net income (or loss) for the period

A) is found by computing the difference between the income statement credit column and the statement of financial position credit column on the worksheet.
B) cannot be found on the worksheet.
C) is found by computing the difference between the income statement columns of the worksheet.
D) is found by computing the difference between the trial balance totals and the adjusted trial balance totals.

Question 69

Use the following data, taken from the adjusted trial balance, for 70 and 71.
Which of the following permanent account is changed during the closing process?

A) Share Capital-Ordinary.
B) Retained Earnings.
C) Unearned Service Revenue.
D) None of these answer choices are correct.

Question 70

Assuming that there is a net loss for the period, debits equal credits in all but which section of the worksheet?

A) Income statement columns
B) Adjustments columns
C) Trial balance columns
D) Adjusted trial balance columns

Question 71

Use the following data, taken from the adjusted trial balance, for 70 and 71.
Which of the following accounts is least likely to have its balance change on the worksheet?

A) Salaries and Wages Payable.
B) Supplies.
C) Accumulated Depreciation.
D) Share Capital-Ordinary.

Question 72

When using a worksheet, adjusting entries are journalized

A) after the worksheet is completed and before financial statements are prepared.
B) before the adjustments are entered on to the worksheet.
C) after the worksheet is completed and after financial statements are prepared.
D) before the adjusted trial balance is extended to the proper financial statement columns.

Question 73

The worksheet does not show

A) net income or loss for the period.
B) revenue and expense account balances.
C) the ending balance in Retained Earnings .
D) the trial balance before adjustments.

Question 74

Adjusting entries are prepared from

A) source documents.
B) the adjustments columns of the worksheet.
C) the general ledger.
D) last year's worksheet.

Question 75

The temporary account balances ultimately wind up in what account?

A) Income Summary.
B) Retained Earnings.
C) Share Capital-Ordinary.
D) Comprehensive Income.

Question 76

The permanent accounts appear on which financial statement?

A) Statement of Financial Position.
B) Income Statement.
C) Retained Earnings Statement.
D) Statement of Cash Flows.

Question 77

The Income Summary account

A) is a permanent account.
B) appears on the statement of financial position.
C) appears on the income statement.
D) is a temporary account.

Question 78

Closing entries are

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

Question 79

Use the following data, taken from the adjusted trial balance, for 70 and 71.
What amount will be reflected for Retained Earnings in the Statement of Financial Position columns of the worksheet?

A) €996
B) €760
C) €696
D) €1,060

Question 80

The Statement of Financial Position columns of the worksheet contain data for what financial statement?

A) Income Statement.
B) Retained Earnings Statement.
C) Statement of Cash Flows.
D) None of these answer choices are correct.