Ch. 4 Completing the Accounting Cycle

Question 1

A list of permanent accounts and their balances after a company has journalized and posted closing entries.

Answer 1

Post-closing trial balance

Question 2

The average time that it takes to purchase inventory, sell it on account, and then collect cash from customers.

Answer 2

Operating cycle

Question 3

Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders equity account, retained earnings.

Answer 3

Closing entries

Question 4

Obligations that a company expects to pay after one year.

Answer 4

Long-term liabilities

Question 5

A balance sheet that contains standard classifications or sections

Answer 5

Classified balance sheet

Question 6

A multiple-column form that may be used in making adjustments and in preparing financial statements.

Answer 6

Worksheet

Question 7

The ownership claim of shareholders on total assets. It is to a corporation hz owners equity is to a proprietorship.

Answer 7

Stockholders’ equity

Question 8

Entries to correct errors made in recording transactions.

Answer 8

Correcting entries

Question 9

Accounts that relate to one or more future accounting periods. Consist of all balance sheet accounts. Balances are carried forward to the next accounting period.Consist of assets, liabilities, common stock and retained earnings

Answer 9

Permanent (real) accounts

Question 10

Generally, (1) investments in stocks and bonds of other companies that are normally held for many years; (2) long-term assets, such as land and buildings, not currently being used in operating activities; and (3) long-term notes receivable.

Answer 10

Long-term investments

Question 11

Obligations that a company expects to pay within the coming year or it’s operating cycle, whichever is longer.

Answer 11

Current liabilities

Question 12

A temporary account used in closing revenue and expense accounts

Answer 12

Income summary

Question 13

Assets with relatively long useful lives that are currently being used in operations.

Answer 13

Property, plant, and equipment

Question 14

Accounts that relate only to a given accounting period. Consist of revenues, expenses, the dividend account, and the income summary account. All temporary account are closed at the end of the accounting period.

Answer 14

Temporary (nominal) accounts

Question 15

Assets that a company expects to convert to cash or use up within one year of its operating cycle, which ever is longer

Answer 15

Current assets

Question 16

Long-lived Assets that do not have a physical substance

Answer 16

Intangible assets

Question 17

An entry, made at the beginning of next accounting period That is the exact opposite of the adjusting entry made in the previous period.

Answer 17

Reversing entry

Question 18

The ability of a company to pay obligations expected to be due within the next year.

Answer 18

Liquidity

Question 19

Non-interest-bearing liabilities that arise from the operating activities of the business, as well as interest bearing note payable that have a maturity date of one year or less from the balance sheet date. Any other liabilities that must be paid within the upcoming financial period.

Answer 19

Current liabilities

Question 20

Those deaths that are payable over a comparatively long period, Usually more than one year. Generally, any debt that is not due within the next year is classified in this category. Ordinarily, mortgage payable and bonds payable or the count in this category for a corporation.

Answer 20

Long-term liabilities

Question 21

Revenues minus expenses = net income

Answer 21

Income statement

Question 22

Shows the effect of current. Transactions on retain earnings. It explains how retain earnings changed over a period of time

Answer 22

Statement of retained earnings

Question 23

Reports the financial condition of a company at a precise moment in time

Answer 23

Balance sheet

Question 24

Shows the companies sources and uses of cash during the period

Answer 24

Statement of cash flow’s

Question 25

Temporary accounts

R E D

Answer 25

Revenues Expenses Dividends

Question 26

Steps in closing process:

Answer 26

1) Close revenues to the income summary account
2) Close expenses to the income summary account.
3) Close the income summary account to retained earnings
4) Close dividends to retained earnings