AC Financial Statements

Question 1

Fill in the blank

The balances of the accounts reported on the ___ are carried forward from period to period.

Closing Entries

Completing the Accounting Cycle

Answer 1

balance sheet

Closing Entries

Completing the Accounting Cycle

Question 2

Fill in the blank

The balances of the accounts reported on the balance sheet are carried forward from ___.

Closing Entries

Completing the Accounting Cycle

Answer 2

period to period

Closing Entries

Completing the Accounting Cycle

Question 3

Fill in the blank

Because the accounts reported on the balance sheet are carried forward from period to period, they are called ___ or ___.

Closing Entries

Completing the Accounting Cycle

Answer 3

permanent accounts [or] real accounts

Closing Entries

Completing the Accounting Cycle

Question 4

enumerate

balance sheet permanent accounts

Closing Entries

Completing the Accounting Cycle

Answer 4

• Cash
• Accounts Receivable
• Equipment
• Accumulated Depreciation
• Accounts Payable
• Owner’s Capital
• any account whose balance doesn’t reset to zero at the end of the period

Closing Entries

Completing the Accounting Cycle

Question 5

Complete the sentence

The accounting process begins with (1) […] and
ends with (2) […]

Closing Entries

Answer 5

(1) analyzing and journalizing transactions
(2) post-closing trial balance

Closing Entries

Question 6

Concept

Transactions are analyzed and recorded in the journal

Financial Accounting 16e

Answer 6

Accounting Cycle - Step 1

Financial Accounting 16e

Question 7

Concept

Transactions are posted to the ledger.

Financial Accounting 16e

Answer 7

Accounting Cycle - Step 2

Financial Accounting 16e

Question 8

Concept

An unadjusted trial balance is prepared

Financial Accounting 16e

Answer 8

Accounting Cycle - Step 3

Financial Accounting 16e

Question 9

Concept

Adjustment data are assembled and analyzed

Financial Accounting 16e

Answer 9

Accounting Cycle - Step 4

Financial Accounting 16e

Question 10

Concept

An optional end-of-period spreadsheet is prepared

Financial Accounting 16e

Answer 10

Accounting Cycle - Step 5

Financial Accounting 16e

Question 11

Concept

Adjusting entries are journalized and posted to the ledger

Financial Accounting 16e

Answer 11

Accounting Cycle - Step 6

Financial Accounting 16e

Question 12

Concept

An adjusted trial balance is prepared

Financial Accounting 16e

Answer 12

Accounting Cycle - Step 7

Financial Accounting 16e

Question 13

Concept

Financial statements are prepared

Financial Accounting 16e

Answer 13

Accounting Cycle - Step 8

Financial Accounting 16e

Question 14

Concept

Closing entries are journalized and posted to the ledge

Financial Accounting 16e

Answer 14

Accounting Cycle - Step 9

Financial Accounting 16e

Question 15

Concept

A post-closing trial balance is prepared

Financial Accounting 16e

Answer 15

Accounting Cycle - Step 10

Financial Accounting 16e

Question 16

identify which steps are missing from the accounting cycle

a. Transactions are analyzed and recorded in the journal.
b. Transactions are posted to the ledger.
c. Adjustment data are assembled and analyzed.
d. An optional end-of-period spreadsheet is prepared.
e. Adjusting entries are journalized and posted to the ledger.
f. Financial statements are prepared.
g. Closing entries are journalized and posted to the ledger.
h. A post-closing trial balance is prepared.

Accounting Cycle

Answer 16

(1) the preparation of an unadjusted trial balance after step (e)
(2) The unadjusted trial abalance should be prepared after step (b)

Accounting Cycle

Question 17

Enumerate steps

The first step in the accounting cycle is to analyze and record transactions using …

Accounting Cycle

Answer 17

1. Carefully read the description of the transaction to determine nature: asset, liability, owner’s equity, revenue, expense, or drawing
2. Determine increases or decreases in the affected accounts involving the transaction
3. Determine whether each increase or decrease is a debit or credit
4. Record the transaction using a journal entry

Accounting Cycle

Question 18

Enumerate steps

Step 2. Posting transactions to the ledger using…

Accounting Cycle

Answer 18

1. The date is entered in the Date column for the account
2. The amount is entered in the Debit or Credit column
3. The jounral page number is entered in the Posting Reference column
4. The account number is entered

Accounting Cycle

Question 19

Enumerate steps

Step 3. Preparing an unadjusted trial balance

Accounting Cycle

Answer 19

1. A check for the equality of debits and credits is made.
2. If the two totals of a trial balance are not equal, an error has occured.
3. The error is then discovered and corrected.

Accounting Cycle

Question 20

Enumerate steps

Step 4. Assembling and analyzing adjustment data

Accounting Cycle

Answer 20

1. The accounts must be updated.
2. The four types of accounts that normally require updating: prepaid expenses, unearned revenue, accrued revenue, and accrued expenses.

Accounting Cycle

Question 21

Enumerate steps

Step 5. Preparing an optional end-of-period spreadsheet

Accounting Cycle

Answer 21

1. An end-of-period spreadsheet is useful in showing the flow of accounting information from the unadjusted.
2. it is also useful in analyzing the impact of proposed adjustments on financial statements.

Accounting Cycle

Question 22

Enumerate steps

Step 5. Preparing an optional end-of-period spreadsheet

Accounting Cycle

Answer 22

1. An end-of-period spreadsheet is useful in showing the flow of accounting information from the unadjusted.
2. it is also useful in analyzing the impact of proposed adjustments on financial statements.

Accounting Cycle

Question 23

Enumerate steps

Step 6. Journalizing and posting adjusting entries

Accounting Cycle

Answer 23

1. Each adjusting entry affects at least one income statement account and one balance sheet account.
2. Explanations for each adjustment including any computations are normally included with each adjusting entry

Accounting Cycle

Question 24

Enumerate steps

Step 7. Preparing an adjusting trial balance

Accounting Cycle

Answer 24

1. The adjusted trial balance is the last step before preparing the financial statements.
2. The adjusted trial balance must balance

Accounting Cycle

Question 25

# Enumerate steps Step 8. Preparing the financial statements | Accounting Cycle

Answer 25

1. The income statement is prepared 2. The statement of owner's equity is prepared 3. The balance sheet is prepared last 4. The net income or net loss from income statement is reported on the statement of owner's equity along with any additional investments and withdrawals by the owner. 5. The ending owner's capital is reported on the balance sheet 6. This value is added with total liabilities to equal total assets | Accounting Cycle

Question 26

# Enumerate steps Step 9. Journalizing and posting closing entries | Accounting Cycle

Answer 26

Two closing entries are required at the end of the accounting period. 1. **First Closing Entry**: *Debit each revenue account for its balance, Credit each expense account for its balance Credit (net income) or Debit (net loss) the owner's capital account* 2. **Second Closing Entry**: *Debit the owner's capital account for the balance of the drawing account Credit the drawing account* | Accounting Cycle

Question 27

# Enumerate steps Step 10. Preparing a post-closing trial balance | Accounting Cycle

Answer 27

1. A post-closing trial balance is prepared after the closing entries have been posted. 2. The accounts and amounts in the post-closing trial balance shold agree exactly with the accounts and amounts listed on the balance sheet at the end of the period. | Accounting Cycle

Question 28

# Fill in the blank The ability to convert assets into cash is called ___. | Accounting Cycle

Answer 28

liquidity | Accounting Cycle

Question 29

# Fill in the blank The ability of a business to pay its debts is called ____. | Accounting Cycle

Answer 29

solvency | Accounting Cycle

Question 30

# Fill in the blank Two financial measures for evaluating a business's liquidity and solvency are working ___ and _____. | Accounting Cycle

Answer 30

working capital [and] current ratio | Accounting Cycle

Question 31

# Concept Is the excess of the current assets of a business over its current liabilities. | Accounting Cycle

Answer 31

working capital | Accounting Cycle

Question 32

# Concept Is another means of expressing the relationship between current assets and current liabilities. | Accounting Cycle

Answer 32

working capital | Accounting Cycle

Question 33

# Fill in the blank __*(1)*___ assets are more liquid than __*(2)*___ assets. | Accounting Cycle

Answer 33

1. current 2. long-term | Accounting Cycle

Question 34

# Determine the working capital and current ratio for 20Y6 and 20Y6

Answer 34

Question 35

# Is the change in the current ratio from 20Y6 to 20Y7 favorable?

Answer 35

($310,500 / $172,500) = 1.80 20Y7 ($262,500 / $150,000) = 1.75 20Y6 The change from 1.75 to 1.80 is favorable.