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Cross-referencing is useful in assuring that the debits and credits are in balance. |
F |
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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. |
T |
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Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements. |
T |
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The most important output of the accounting cycle is the financial statements. |
T |
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The work sheet is not considered a part of the formal accounting records. |
T |
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After analyzing transactions, the next step would be to post the transactions in the ledger. |
F |
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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. |
F |
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On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount. |
T |
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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. |
T |
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The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings. |
T |
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Land is an example of a plant asset. |
T |
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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. |
F |
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There is really no benefit in preparing financial statements in any particular order. |
F |
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Prepaid Insurance is an example of a current asset. |
T |
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Accrued revenues are ordinarily listed on the balance sheet as current liabilities. |
F |
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Liabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities. |
T |
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Capital and Drawing are reported in the owner’s equity section of the balance sheet. |
F |
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Accrued expenses are ordinarily listed on the balance sheet as current assets. |
F |
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Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets. |
F |
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Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets. |
T |
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Office Equipment is an example of a current asset account. |
F |
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At the end of the fiscal period, prepaid expenses are reported on the Income Statement as expenses. |
F |
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The amount of the net income for a period appears on both the income statement and the balance sheet for that period. |
F |
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The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet. |
T |
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Accrued taxes payable are generally reported on the balance sheet as a current liability. |
T |
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The income summary account is closed to the owner’s capital account. |
T |
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The accumulated depreciation account is closed to the income summary account. |
F |
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In a sole proprietorship, a closing entry for the drawing account may not be necessary. |
F |
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The drawing account is closed to the income summary account. |
F |
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Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire. |
F |
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The balance sheet accounts are referred to as real or permanent accounts. |
T |
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The drawing account is a temporary account. |
T |
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The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance. |
F |
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Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period. |
T |
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Accumulated Depreciation is a permanent account. |
T |
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Entries required to close the balances of the temporary accounts at the end of the period are called final entries |
F |
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All income statement accounts will be closed at the end of the period. |
T |
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Closing entries are entered directly on to the work sheet. |
F |
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A post-closing trial balance contains only asset and liability accounts. |
F |
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Balance Sheet are not considered real accounts. |
F |
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Journalizing and posting closing entries must be completed before financial statements can be prepared. |
F |
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A post-closing trial balance should be prepared before the financial statements are prepared. |
F |
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The income summary account is also known as the clearing account. |
T |
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The post-closing trial balance will generally have fewer accounts than the trial balance. |
T |
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It is not necessary to post the closing entries to the general ledger. |
F |
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Once an account has been closed for the period, inserting a line in the balance columns zero’s out the account making it ready for the following period. |
T |
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During the closing process, some balance sheet accounts are closed and end the period with a zero balance. |
F |
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Assets, liabilities, and owner’s capital are real accounts and do not get closed at the end of the period. |
T |
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The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period. |
T |
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Financial statements should be prepared before the closing entries are journalized and posted. |
T |
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The last step of the accounting cycle is to prepare a post-closing trial balance. |
T |
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The accounting cycle begins with preparing an unadjusted trial balance. |
F |
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The majority of businesses end their fiscal year on December 31. |
T |
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Any twelve-month accounting period adopted by a company is known as its fiscal year. |
T |
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A fiscal year that ends when business activities have reached their lowest point is called the natural business year. |
T |
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All companies must use a calendar year as their fiscal year. |
F |
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