Accounting Ch. 4 Self Test – Flashcards
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A worksheet is a device that eliminates the need to prepare financial statements.
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False (A worksheet may be used in preparing financial statements but does not eliminate the need to prepare financial statements)
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A worksheet is not a journal, and it cannot be used as a basis for posting to ledger accounts
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True
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To enter net income for the period into a work sheet requires an entry to the
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Income statement debit column and the balance sheet credit column.
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In a worksheet, net income is entered in the following columns
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Income statements (Dr) and balance sheet (Cr)
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A worksheet is a
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device used in preparing financial statements
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The dividends account appears in which column(s) of the worksheet?
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trial balance, adjusted trial balance, and balance sheet
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In closing the books, all temporary accounts are closed
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true
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Closing entries are necessary for
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temporary accounts only
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An account that will have a zero balance after closing entries have been journalized and posted is
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Service Revenue (because it is an income statement or temporary account)
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The closing process involves separate entries to close (1) expenses, (2) drawings, (3) revenues, and (4) income summary. The correct sequencing of the entries is
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(3), (1), (4), (2)
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Companies generally prepare closing entries directly from the
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adjusted balances in the ledger.
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The post-closing trial balance will contain only temporary accounts.
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False (only real or permanent accounts will appear on a post-closing trial balance)
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The purpose of the post-closing trial balance is to
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prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
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Which one of the following is an optional step in the accounting cycle of a business enterprise?
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prepare a work sheet
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All of the following are required steps in the accounting cycle except:
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preparing a worksheet (Journalizing and posting closing entries, preparing financial statements, journalizing the transactions)
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Correcting entries are only made at the end of an accounting period.
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False (correcting entries should be made as soon as the error is discovered)
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On September 23, Reese Company received a $350 check from Mike Moluf for services to be performed in the future. The bookkeeper for Reese Company incorrectly debited Cash for $350 and credited Account Receivable for $350. The amounts have been posted to the ledger. To correct this entry the bookkeeper should
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debit Accounts Receivable $350 and credit Unearned Service Revenue $350
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Cash of $100 received at the time the service was provided was journalized and posted as a debit to Cash $100 and a credit to Accounts Receivable $100. Assuming the incorrect entry is not reversed, the correcting entry is
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debit Accounts Receivable $100 and credit Service Revenue $100
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Whitman Company paid $630 cash on account to a creditor. The transaction was incorrectly recorded as a debit to Cash of $360 and a credit to Accounts Receivable of $360. The correcting entry is
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Debit to accounts Payable, $630, debit to Accounts Receivable, $360, and credit to Cash, $990
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Current liabilities are obligations that are reasonably expected to be paid from existing current assets or through the creation of other current liabilities.
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True
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Current Liabilities
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are obligations that the company expects to pay within the coming year
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A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. The land should be reported as
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a long-term investment (long-term investments include long-term assets such as land that a company is not currently using in its operating activities)
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Current assets are listed
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by liquidity
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Patents and copyrights are
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intangible assets (because they have no physical substance)
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Within the current liabilities section, companies usually list _____ first
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notes payable
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All of the following are stockholders' equity accounts except
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Investment in Stock (preferred stock, common stock, retained earnings)
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Use of reversing entries is not a required step in the accounting cycle
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True
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Use of reversing entries
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simplifies the recording of subsequent transactions
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Which of the following is an optional step in the accounting cycle?
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Reversing entries (adjusting entries, closing entries, correcting entries)
