Deck 4: Completing the Accounting Cycle

Question 1

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.

Answer 1

False

Question 2

Land is an example of a plant asset.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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 6

The usual presentation of the retained earnings statement is (1) beginning retained earnings, (2) net income or loss, (3) dividends (4) ending retained earnings.

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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 12

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 13

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

Question 14

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

Question 15

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

Question 16

Prepaid Insurance is an example of a current asset.

Question 17

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

Question 18

Office Equipment is an example of a current asset account.

Question 19

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

Question 20

Capital Stock and Dividends are reported in the stockholders' equity section of the balance sheet.

Question 21

The dividends account is closed to the income summary account.

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

Cash, Accounts Payable, and Capital Stock are real accounts and do get closed at the end of the period.

Question 30

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

Question 31

Accumulated Depreciation is a permanent account.

Question 32

The income summary account is closed to the retained earnings account.

Question 33

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

Question 34

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

Question 35

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

Question 36

Closing entries are entered directly on to the work sheet.

Question 37

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

Question 38

The dividends account is a temporary account.

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

Balance Sheet accounts are considered real accounts.

Question 44

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

Question 45

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

Question 46

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

Question 47

The balances of the equity accounts from the Adjusted Trial Balance columns of the work sheet are extended to the Retained Earnings Statement columns.

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

Real accounts are permanent accounts.

Question 56

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

Question 57

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

Question 58

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 59

The accounting cycle begins with preparing an unadjusted trial balance.

Question 60

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

Question 61

The work sheet and the financial statements both require dollar signs.

Question 62

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 63

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

Question 64

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

Question 65

After net income or loss is entered on the work sheet, the debit column total must equal the credit column total of the Balance Sheet columns.

Question 66

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

Question 67

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

Question 68

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 69

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) Both will need to be in balance in order to continue with the end-of-period processing.
C) The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts.
D) The unadjusted trial balance will be used to record the adjustments for the period.

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 all of the adjustments were posted in the correct accounts
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

When preparing the retained earnings statement, the beginning retained earnings 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 Adjustments columns of the work sheet

Question 72

The balance in the retained earnings account on the work sheet will equal the amount presented in the balance sheet.

Question 73

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 74

Notes receivable due in 350 days appear on the

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

Question 75

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

Question 76

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 77

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 78

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 79

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

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.