Question 1

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

Accepted Answer

A business entity may go through multiple accounting cycles over its economic existence, which could be years or even decades. An accounting cycle is the process of recording, classifying, and summarizing financial transactions of a business during a specific period, typically a month, a quarter, or a year.

Question 2

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

Accepted Answer

The post-closing trial balance is not entered in the first two columns of a worksheet; instead, the adjusted trial balance figures are entered in these columns. The post-closing trial balance is prepared after the closing entries are made and typically does not appear on the worksheet itself.

Question 3

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

Accepted Answer

Closing entries are necessary to transfer the balances of temporary accounts (such as revenue and expenses) to retained earnings in order to prepare the accounts for the next accounting period. This process helps ensure that each accounting period stands on its own and provides accurate financial information for decision-making.

Question 4

Closing entries are journalized after adjusting entries have been journalized.

Accepted Answer

This is because closing entries are made at the end of the accounting period to transfer the balances of nominal accounts to the retained earnings account, and this can only be done after adjusting entries have been made to ensure that all accounts are up-to-date and accurate.

Question 5

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.

Accepted Answer

While a worksheet may show the financial position and net income of a business, formal financial statements, such as balance sheets and income statements, need to be prepared for accurate and comprehensive reporting purposes.

Question 6

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

Accepted Answer

Adjustments on a worksheet are used for planning purposes and must be journalized and posted to the ledger accounts as separate transactions, not directly from the worksheet.

Question 7

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

Accepted Answer

The depreciation expense account represents an expense and as such will be listed in the income statement debit column of a worksheet.

Question 8

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

Accepted Answer

The answer of Closing the dividends account to Retained Earnings...

Question 9

Both correcting entries and adjusting entries always affect at least one balance sheet account and one income statement account.

Accepted Answer

Adjusting entries always affect at least one income statement account and one balance sheet account, but correcting entries may affect only balance sheet accounts, only income statement accounts, or both, depending on the nature of the error being corrected.

Question 10

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

Accepted Answer

This is correct according to basic accounting principles, as a higher total credit balance indicates that the company has earned more revenue than it has incurred expenses, resulting in a net income.

Question 11

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

Accepted Answer

The income statement reports revenues and expenses for a specific period and does not include balance sheet accounts, which are the accounts that appear on the post-closing trial balance. The post-closing trial balance includes only permanent accounts (assets, liabilities, and equity) and not the temporary accounts (revenues, expenses, dividends) that are closed to equity and appear on the income statement.

Question 12

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

Accepted Answer

The adjusted trial balance columns of a worksheet are obtained by adding the adjustments to the trial balance columns, not subtracting them.

Question 13

A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet.

Accepted Answer

A worksheet is not a mandatory form, it is an optional tool used by accountants to help prepare financial statements.

Question 14

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

Accepted Answer

The answer of The dividends account is closed to the...

Question 15

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

Accepted Answer

Correcting entries can be made anytime an error is discovered or identified, regardless of whether it's at the end of an accounting period or not.

Question 16

The accounting cycle begins at the start of a new accounting period.

Accepted Answer

The accounting cycle is a continuous process that begins at the start of a new accounting period, such as a month or a year. It involves a series of steps from recording transactions to preparing financial statements and closing out the books at the end of the period.

Question 17

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

Accepted Answer

Worksheets are used to prepare financial statements and can be used to calculate and record adjusting entries before journalizing them. This allows for more accurate and efficient preparation of financial statements.

Question 18

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

Accepted Answer

Closing revenue and expense accounts to the Income Summary account is a necessary bookkeeping procedure to determine the net income or loss of a business for a specific period. The Income Summary account is then closed to the Retained Earnings account in order to transfer the profits or losses to the company's equity.

Question 19

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

Accepted Answer

This is because all temporary accounts, including revenue, expense, and dividend accounts, are closed out to the retained earnings account at the end of the accounting period. As a result, temporary accounts should have zero balances after the closing entries have been made.

Question 20

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

Accepted Answer

The answer of The dividends account is a permanent account...

Quiz 4: Completing the Accounting Cycle