CHAPTER 4: COMPLETING THE ACCOUNTING CYCLE
1.
Cross-referencing is useful in assuring that the debits and credits are in balance.
a.
True
b.
False
2.
When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are
simply
added to the account title column.
a.
True
b.
False
3.
Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
4.
There is really no benefit in preparing financial statements in any particular order.
a.
True
b.
False
5.
On the income statement, miscellaneous expenses are usually presented as the last item without regard to the
dollar
amount.
a.
True
b.
False
6.
The usual presentation of the statement of owner’s equity is (1) Beginning capital, (2) Net income or loss,
(3)
Drawing, (4) Owner’s contributions, (5) Ending capital.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
7.
The difference between a classified balance sheet and one that is not classified is that the classified one has
subheadings.
a.
True
b.
False
8.
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.
a.
True
b.
False
9.
Prepaid Insurance is an example of a current asset.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
10.
Land is an example of a plant asset.
a.
True
b.
False
11.
Liabilities that will be due within one year or less and that are to be paid out of current assets are called
current
liabilities.
a.
True
b.
False
12.
The amount of the net income for a period appears on both the income statement and the balance sheet for
that
period.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
13.
Accrued taxes payable are generally reported on the balance sheet as a current liability.
a.
True
b.
False
14.
Office Equipment is an example of a current asset account.
a.
True
b.
False
15.
Capital and drawing are reported in the owner’s equity section of the balance sheet.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
16.
Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets.
a.
True
b.
False
17.
Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current
assets.
a.
True
b.
False
18.
Accrued expenses are ordinarily listed on the balance sheet as current assets.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
19.
Accrued revenues are ordinarily listed on the balance sheet as current liabilities.
a.
True
b.
False
20.
The income statement is prepared from the adjusted trial balance or the income statement columns on the
work
sheet.
a.
True
b.
False
21.
After analyzing transactions, the next step would be to post the transactions in the ledger.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
22.
Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short
time
before they expire.
a.
True
b.
False
23.
Accumulated Depreciation is a permanent account.
a.
True
b.
False
24.
The drawing account is a temporary account.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
25.
The balance sheet accounts are referred to as real or permanent accounts.
a.
True
b.
False
26.
Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period.
a.
True
b.
False
27.
The income summary account is closed to the owner’s capital account.
a.
True
b.
False
28.
The accumulated depreciation account is closed to the income summary account.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
29.
The drawing account is closed to the income summary account.
a.
True
b.
False
30.
The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance.
a.
True
b.
False
31.
Entries required to close the balances of the temporary accounts at the end of the period are called final entries.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
32.
Journalizing and posting closing entries must be completed before financial statements can be prepared.
a.
True
b.
False
33.
During the closing process, some balance sheet accounts are closed and end the period with a zero balance.
a.
True
b.
False
34.
Closing entries are entered directly on to the work sheet.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
35.
The post-closing trial balance will generally have fewer accounts than the trial balance.
a.
True
b.
False
36.
A post-closing trial balance contains only asset and liability accounts.
a.
True
b.
False
37.
A post-closing trial balance should be prepared before the financial statements are prepared.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
38.
Assets, liabilities, and owner’s capital are real accounts and do not get closed at the end of the period.
a.
True
b.
False
39.
The income summary account is also known as the clearing account.
a.
True
b.
False
40.
All income statement accounts will be closed at the end of the period.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
41.
Accounts reported on the balance sheet that are carried forward from year to year are known as permanent
accounts.
a.
True
b.
False
42.
Balance sheet accounts are not considered real accounts.
a.
True
b.
False
43.
Real accounts are not permanent accounts.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
44.
It is not necessary to post the closing entries to the general ledger.
a.
True
b.
False
45.
The closing process is sometimes referred to as closing the books.
a.
True
b.
False
46.
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.
a.
True
b.
False
47.
The last step of the accounting cycle is to prepare a post-closing trial balance.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
48.
The most important output of the accounting cycle is the financial statements.
a.
True
b.
False
49.
The accounting cycle begins with preparing an unadjusted trial balance.
a.
True
b.
False
50.
Financial statements should be prepared before the closing entries are journalized and posted.
a.
True
b.
False
51.
The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
52.
Any twelve-month accounting period adopted by a company is known as its fiscal year.
a.
True
b.
False
53.
A fiscal year that ends when business activities have reached their lowest point is called the natural business year.
a.
True
b.
False
54.
All companies must use a calendar year as their fiscal year.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
55.
The majority of businesses end their fiscal year on December 31.
a.
True
b.
False
56.
The balances of the capital accounts from the Adjusted Trial Balance of the work sheet are extended to the Statement
of Owner’s Equity columns.
a.
True
b.
False
57.
The work sheet is not considered a part of the formal accounting records.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
58.
The work sheet is a working paper that accountants can use to summarize adjusting entries and the
account
balances for the financial statements.
a.
True
b.
False
59.
The trial balance may be listed on the work sheet instead of being prepared separately.
a.
True
b.
False
60.
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.
a.
True
b.
False
Chapter 4: Completing the Accounting Cycle
61.
A work sheet heading is dated for a period of time.
a.
True
b.
False
62.
On the work sheet, the capital and drawing account balances are extended to the Balance Sheet columns.
a.
True
b.
False
63.
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.
a.
True
b.
False