FA Chapter 6

Question 1

Even though the balance sheet account balances carry forward from period to period, the income statement accounts…

Answer 1

DO NOT

Question 2

Closing Entries (2 Steps):

Answer 2

1. ) Transfer net income (or loss) to retained earnings

2. ) Establish a zero balance in each of the temporary (nominal) accounts to start the next accounting period.

Question 3

Post-Closing Trial Balance

Answer 3

After all temporary accounts have been closed, we prepare a post-closing trial balance. Only assets, liabilities, and stockholders’ equity accounts will appear. All revenue, expense, gain and loss accounts will have a zero balance.

Question 4

Annual Reports are also called____and contain…

Answer 4

A.)10K
B.)
1.Four basic financial statements.
2.Related notes (footnotes).
3.Report of independent accountants (auditor’s opinion) if the statements are audited.

Question 5

Quarter Reports are also called___and contain…

Answer 5

A.) 10Q
B.)
1.Usually begin with short letter to stockholders
2.Condensed unaudited income statement and balance sheet for the quarter.
3.Often, cash flow statement and statement of stockholders’ equity are omitted. Some notes to the financial statements also may be omitted.