Flashcards on STUDY Office Accounting Ch. 4-6

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covered completely
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Corrections in accounts should NOT be
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a description of special entries
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The Item column in the general ledger is used for
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enter the balance
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The steps in the journalizing process include all of the following EXCEPT
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False
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A list of all the accounts used by a business is called a trial balance.
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as the first entry on a page
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The month in the journal is recorded
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False
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An account in the chart of accounts is assigned a number at random.
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debiting Drawing and crediting Cash
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Cash is used to pay for a car for personal use by the owner. The transaction includes
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False
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When the trial balance indicates that the ledger is in balance, you can assume there are no errors in the ledger.
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False
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A two-column journal has only two amount columns?one for the amount of the entry and one for the running balance.
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the ruling method
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Corrections in accounts should be made by
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False
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The posting reference, amount, and description are the three items of information about each transaction that should be entered in the ledger accounts.
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debiting Rent Expense and crediting Cash
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If cash is paid for office rent, the transaction includes
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True
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Firms are more likely to use a four-column ledger account than T accounts.
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False
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It is permissible to enter information about a transaction in the ledger accounts first, before entering the information in the journal.
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True
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Each entry in the journal affects two or more accounts.
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numerical order
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The accounts in the chart of accounts are arranged in
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source documents
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Forms and papers that provide information about a business transaction are called
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debiting Telephone Expense and crediting Cash
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The payment of a telephone bill for the month would include
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True
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A separate line in the two-column journal should be used for each account title.
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False
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An account in the chart of accounts is assigned a number at random.
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True
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Source documents begin the process of entering transactions in the accounting system.
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True
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Source documents provide objective, verifiable evidence of business transactions.
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False
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When entering titles of accounts in the two-column journal, the account to be credited is entered first and the account to be debited is entered second.
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False
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Almost any document that provides information about a business transaction is included in the chart of accounts.
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debiting Drawing and crediting Cash
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Cash is used to pay for a car for personal use by the owner. The transaction includes
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debiting Accounts Payable and crediting Cash
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The transaction to record payment for delivery equipment that was purchased on account in the previous month would include
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False
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A list of all the accounts used by a business is called a trial balance.
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True
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The journal provides the information needed to transfer the debits and credits to the accounts in the ledger.
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False
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Entering transactions in a journal is called posting.
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erase questionable entries
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To find an error, you should do all of the following EXCEPT
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debiting Cash and crediting Service Revenue
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Service revenue received in cash is entered by
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four-column account
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Instead of T accounts, businesses are more likely to use a
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debiting Rent Expense and crediting Cash
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If cash is paid for office rent, the transaction includes
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covered completely
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Corrections in accounts should NOT be
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sales of goods or services
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Copies of sales tickets or sales invoices issued to customers or clients provide information about
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False
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A two-column journal has only two amount columns?one for the amount of the entry and one for the running balance.
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cash payments
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Check stubs and carbon copies of checks provide information about
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True
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The general ledger is kept to supply management with desired information in summary form.
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True
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It is permissible to enter information about a transaction in the ledger accounts first, before entering the information in the journal.
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False
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The main advantage of a two-column account is that it maintains a running balance.
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cash receipts
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Receipt stubs, carbon copies of receipts, cash register tapes, or memos of cash register totals provide information about
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enter the balance
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The steps in the journalizing process include all of the following EXCEPT
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day
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For EVERY transaction, the accountant enters the
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Enter the description of the entry
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Posting from the journal to the ledger does NOT involve which of the following steps?
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no entry is required
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To record wages earned but not paid under the modified cash accounting method,
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False
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A contra-asset appears on the income statement.
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True
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Depreciation matches the cost of an asset against the revenues it will produce.
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contra-account
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An account used with a related account to bring about a decrease in the net amount of the two account balances is called a(n)
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True
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If the debits in the Income Statement columns of the work sheet total $50,000 and the credits total $60,000 before net income or net loss has been determined, the business has a net income of $10,000.
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revenue earned with the expenses incurred to produce the revenue
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The matching principle in accounting requires the matching of
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True
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The original cost of an asset added to its salvage value represents the depreciable cost of an asset.
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depreciation
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Matching the cost of an asset with the revenue it is expected to produce is called
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False
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A contra-asset has a debit balance.
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False
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The owner's capital account in the last two columns of the work sheet is an up-to-date account and includes net income and withdrawals of the current period.
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True
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When an account balance is not affected by an adjusting entry, the amount shown in the Trial Balance columns is extended directly to the Adjusted Trial Balance columns.
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True
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"Adjusting" is written in the Item column of the general ledger when posting adjusting entries.
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False
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Accounting for expenses on the cash basis generally means that expenses are entered in the accounts even though they may have been charged and not paid for in cash.
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True
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A computer workstation cost $28,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $3,000 per year.
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True
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The historical cost principle allows for assets to be recorded at actual cost.
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True
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Depreciation expense is recorded for a specific period of time.
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Balance Sheet columns
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The fifth pair of columns on a 10-column work sheet prepared at the end of the period would be the
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True
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A computer workstation cost $28,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $3,000 per year.
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True
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Recording adjustments on the work sheet has no effect on the ledger accounts.
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the amount of depreciation taken in past years
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What does the credit balance in the Accumulated Depreciation account represent?
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True
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The matching principle offers the best measure of net income.
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True
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Under the modified cash basis of accounting, cash payments for assets with lives longer than one accounting period (buildings, equipment, insurance, etc.) are recorded as assets and adjustments are made each period.
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True
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The cash basis of accounting is used by some small businesses and by most individuals for tax purposes.
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True
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Accounting for revenue on a cash basis means that no entry of revenue is made in the account until the cash is received for the services performed.
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$85,000
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Owner's equity at the start of the period is $35,000; net income for the period is $30,000; the total investments by the owner is $15,000; and total withdrawals by the owner is $5,000. The owner's equity at the end of the period is
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True
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The historical cost principle allows for assets to be recorded at actual cost.
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False
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Adjusting entries affect only the owner's equity accounts.
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False
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The cost of plant assets less the accumulated depreciation is called the salvage value of the asset.
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no entry is required
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To record wages earned but not paid under the modified cash accounting method,
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False
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A contra-account is used with a related account to bring about an increase in the net amount of the two account balances.
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False
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The statement of owner's equity is prepared from information from the asset and liability accounts.
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True
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The income summary account is an account used only during the closing process.
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False
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Obligations that need not be paid for a long time, usually more than one year, are classified as current liabilities.
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True
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Assets, liabilities, and the owner's capital account are permanent accounts.
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False
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A separate explanation of each closing entry is necessary.
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Income Summary
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The account to which revenue and expenses are closed is called
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investments by the owner
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Owner's equity can be increased through
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False
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The income summary account appears on the income statement at the end of the accounting period.
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True
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To close the drawing account with a debit balance, credit the account for its balance and debit the owner's capital account.
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revenue accounts, expense accounts, Income Summary, drawing account
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What is the correct sequence for closing the temporary accounts?
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debiting the owner's capital account and crediting Income Summary
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The journal entry to close the income summary account (showing a net loss) includes
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prepare a trial balance, make adjustments, prepare financial statements
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Which of the following steps of the accounting cycle are in the correct order?
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True
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A statement of owner's equity is a statement summarizing all of the changes in owner's equity during a specified period of time.
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the accounting cycle
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The steps involved in handling all of the transactions and events completed during an accounting period, beginning with placing data in a book of original entry and ending with a post-closing trial balance, are referred to collectively as
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$3,000
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The total revenue of the month of June amounted to $6,500; total expenses amounted to $3,500; and withdrawals amounted to $600. The net income for the month amounted to
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True
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Property, plant, and equipment are assets that are expected to serve the business for many years.
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income summary account
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The balance in an expense account is closed to a(n)
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income statement, statement of owner's equity, balance sheet
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The order in which financial statements should be prepared is
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False
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The statement of owner's equity is prepared from information from the asset and liability accounts.
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False
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A mortgage on an office building is an example of a property, plant, and equipment asset.
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False
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The heading for a balance sheet includes the name of the business, the title of the statement, and a period of time.
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True
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Closing entries are made in the journal and posted to the ledger accounts.
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debiting the owner's capital account and crediting the drawing account
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The journal entry to close the drawing account includes
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report form
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A form of balance sheet that lists the liabilities and the owner's equity sections below the assets section is called the
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False
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The end-of-period work sheet is completed after adjusting entries have been recorded and posted.
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debiting the revenue accounts and crediting Income Summary
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The journal entry to close revenue accounts includes
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True
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Current assets include cash and other assets that will be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer.
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False
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A separate explanation of each closing entry is necessary.
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False
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An income statement is an itemized statement that provides information regarding the status of the assets, liabilities, and owner's equity of a business enterprise as of a specified date.
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False
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To close an expense account with a debit balance, debit the account for its balance and credit the income summary account.
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False
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The effect of drawing transactions on the capital account is formalized at any time during the accounting period.
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income summary account
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The balance in an expense account is closed to a(n)
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Owner's Capital
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The account to which the drawing account is closed is called
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post-closing trial balance
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To prove the equality of the debit and credit balances in the general ledger accounts after the closing entries have been journalized and posted, prepare the
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False
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The statement of owner's equity is prepared from information from the asset and liability accounts.
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prepare a trial balance, make adjustments, prepare financial statements
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Which of the following steps of the accounting cycle are in the correct order?
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False
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A separate explanation of each closing entry is necessary.
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Delivery Fees
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After the closing entries are journalized and posted, which of the following accounts would NOT have a balance?
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Miscellaneous Expense
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After the closing entries have been posted, which of the following accounts would NOT have a balance?
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False
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The income summary account appears on the income statement at the end of the accounting period.
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debiting Income Summary and crediting the expense accounts
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The journal entry to close expense accounts includes
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report form
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A form of balance sheet that lists the liabilities and the owner's equity sections below the assets section is called the
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debiting the owner's capital account and crediting the drawing account
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The journal entry to close the drawing account includes
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False
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The income statement includes changes in owner's equity resulting from investments or withdrawals of assets by the owner.
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True
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An income statement is an itemized statement for the purpose of providing information regarding the results of operations during a specified period of time.
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