Question 1

Prepaid insurance is reported on the balance sheet as a
A) current asset
B) fixed asset
C) current liability
D) long-term liability

Accepted Answer

Prepaid insurance is an asset, as it represents an advance payment for an insurance policy that has not yet expired. It is considered a current asset if the coverage period is less than one year, and a long-term asset if the coverage period is longer than one year.

Question 2

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 shareholders' equity section
D) income statement as revenue

Accepted Answer

Unearned fees represent payments received for services that have not yet been rendered. As such, they are considered a liability, and therefore appear on the balance sheet as a current liability. They do not yet represent revenue earned, so they would not appear on the income statement.

Question 3

The statement of retained earnings should be prepared
A) before the income statement and after the balance sheet
B) before the income statement and balance sheet
C) after the income statement and balance sheet
D) after the income statement and before the balance sheet

Accepted Answer

The statement of retained earnings shows the changes in the company's retained earnings over a period of time. It is prepared after the income statement because net income from the income statement is one of the crucial components of the statement of retained earnings. It is prepared before the balance sheet because the ending balance of retained earnings from the statement of retained earnings is one of the key components of the balance sheet. Therefore, the statement of retained earnings should be prepared after the income statement and before the balance sheet, making option D the correct answer.

Question 4

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

Accepted Answer

Net income is shown as a debit in the Income Statement column because it represents revenue earned and expenses incurred during the accounting period. It is also shown as a credit in the Balance Sheet column because it increases owner's equity, which is a credit account.

Question 5

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.

Accepted Answer

This statement is true. The Balance Sheet columns on the work sheet should have the same total for the debit and credit sides if everything has been recorded correctly. If there is a difference, it will be either a net income or net loss, which will be recorded on the Income Statement columns.

Question 6

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 shareholders' 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

Accepted Answer

The purpose of preparing an adjusted trial balance is to ensure that the total debits equal the total credits after all adjusting entries have been made. This verifies that the accounts are in balance and serves as the basis for preparing the financial statements. While the adjusted trial balance does provide information about the net income, this is not its primary purpose. Similarly, while the adjusted trial balance is used to prepare the financial statements and ensure that accounts are correctly flowed to them, this is not the main reason for preparing it.

Question 7

Which one of the fixed asset accounts listed below will not have a related contra asset account?
A) Office Equipment
B) Land
C) Delivery Equipment
D) Building

Accepted Answer

Land is a fixed asset account that typically does not have a related contra asset account. Contrary to other fixed assets, land is not subject to depreciation, and its value usually appreciates over time. Therefore, there is no need to offset the Land account with a contra asset account.

Question 8

The income statement is prepared from
A) the adjusted trial balance
B) the Income Statement columns of the end-of-period spreadsheet
C) either the adjusted trial balance or the Income Statement columns of the end-of-period spreadsheet
D) both the adjusted trial balance and the Income Statement columns of the end-of-period spreadsheet

Accepted Answer

The income statement can be prepared from either the adjusted trial balance or the Income Statement columns of the end-of-period spreadsheet, as both of these reports show the revenue and expense accounts needed to calculate net income. However, it is not necessary to use both reports together to prepare the income statement.

Question 9

Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger.

Accepted Answer

Adjustments entered on the worksheet must be recorded in the journal and posted to the ledger just like any other accounting transaction. The purpose of the worksheet is to organize and summarize the adjustments before recording them in the accounting system.

Question 10

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

Accepted Answer

The answer of A net loss is shown on the...

Question 11

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

Accepted Answer

A worksheet heading typically includes the date or a period of time that the worksheet covers.

Question 12

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

Accepted Answer

The common stock and dividends account balances are permanent accounts and their balances are carried forward to the Balance Sheet columns of the work sheet.

Question 13

When preparing the statement of shareholders' 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

Accepted Answer

The beginning capital balance can be found in the general ledger. This is because the general ledger is the main record of all transactions affecting a company's accounts and includes the beginning balance of each account, including the capital account. The income statement columns of the work sheet show the revenue and expenses for the period, while the cash flows statement shows the inflow and outflow of cash during the period. The balance sheet columns of the work sheet show the ending balances of all accounts, including the capital account.

Question 14

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.

Accepted Answer

The difference between the debit column and the credit column of an Income Statement should represent the net income, not the net loss. In this case, the difference is $2,000, which means that the company had a net income of $2,000, not a net loss. Therefore, the correct answer is B.

Question 15

Notes receivable due in 390 days appear on the
A) balance sheet in the current assets section
B) balance sheet in the noncurrent assets section
C) balance sheet in the current liabilities section
D) income statement as an expense

Accepted Answer

Notes receivable that are due in more than one year (i.e. longer than the current operating cycle) are classified as noncurrent assets and are included in the noncurrent asset section of the balance sheet.

Question 16

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.

Accepted Answer

This is because the Balance Sheet is based on the fundamental accounting equation (Assets = Liabilities + Equity), which requires that debits equal credits. Therefore, in order for the Balance Sheet columns to balance, the debits and credits must be equal.

Question 17

The first item appearing on the statement of retained earnings is
A) net income
B) the ending balance of retained earnings
C) dividends
D) the beginning balance of retained earnings

Accepted Answer

The first item appearing on the statement of retained earnings is the beginning balance of retained earnings from the previous accounting period.

Question 18

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

Accepted Answer

Accumulated Depreciation is a contra-asset account that offsets the value of Property, Plant, and Equipment. Therefore, it appears on the balance sheet in the property, plant, and equipment section.

Question 19

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.

Accepted Answer

The major difference between the unadjusted trial balance and the adjusted trial balance is that the adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts. The adjustments are made to correct any errors or to ensure that the financial statements conform to the GAAP. The unadjusted trial balance is prepared before any adjustments are made, whereas the adjusted trial balance is prepared after making all the necessary adjustments. Therefore, option C is correct as it clearly explains the difference between the two. Options A, B, and D are incorrect as they do not provide a clear explanation of the major difference between the two trial balances.

Question 20

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

Accepted Answer

The chart of accounts is a list of all accounts used by a company, the journal is used to record transactions in chronological order, and the ledger is used to organize and summarize financial information for each account. These three components work together to create an accurate and comprehensive accounting system.

Quiz 4: Completing the Accounting Cycle

Prepaid insurance is reported on the balance sheet as a

Unearned Fees appear on the

The statement of retained earnings should be prepared

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

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.

Once the adjusting entries are posted, the adjusted trial balance is prepared to

Which one of the fixed asset accounts listed below will not have a related contra asset account?

The income statement is prepared from

Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger.

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

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

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

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

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.

Notes receivable due in 390 days appear on the

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.

The first item appearing on the statement of retained earnings is

Accumulated Depreciation appears on the

What is the major difference between the unadjusted trial balance and the adjusted trial balance?

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