Recording and posting the closing entries (closing the temporary accounts) is the final step in the accounting cycle.
True / False
False
The Income Summary account is a real or permanent account and is closed to the Capital account of a sole proprietorship, or is closed in an agreed upon basis to the capital accounts of partners in a partnership.
True / False
False
After the accounts are closed, there should be no unearned revenue accounts with balances.
True / False
False
The proper procedure for closing a revenue account with a normal balance is to debit the revenue account and credit the Income Summary account.
True / False
True
When the final totals of the work sheet Income Statement columns are equal and the final totals of the work sheet Statement of Owner's Equity and Balance Sheet columns are equal, it provides proof that no errors occurred in the preparation of the work sheet.
True / False
False
Preparation of the work sheet and completion of the adjustments columns of the work sheet eliminates the need to journalize and post the adjusting entries.
True / False
False
All of the temporary accounts with balances, except the Income Summary and Withdrawal account, appear in the Income Statement columns of the work sheet.
True / False
True
The Unadjusted Trial Balance on the work sheet contains all of the accounts used by the business.
True / False
False
The work sheet is one of the formal financial statements.
True / False
False
The Capital account balance shown on the work sheet does not reflect the increase or decrease from net income or net loss.
True / False
True
If a single proprietorship business sustains a loss for the period, the closing entries will include a debit to the Capital account and a credit to the Income Summary account.
True / False
True
The net loss sustained by a corporation is closed to the Cash account.
True / False
False
After the closing entries have been recorded and posted, the balance of the Income Summary account will equal the net income of the business.
True / False
False
The last account listed on a post-closing trial balance will be the owner's withdrawal account.
True / False
False
An asset that may reasonably be expected to be realized in cash or be consumed within one year or one operating cycle of the business, whichever is longer, is classified as a current asset.
True / False
True
A debt or obligation that must be paid or liquidated within one year or one operating cycle of the business, is classified as a current liability.
True / False
True
Revenue and expense accounts are called income statement accounts and nominal account.
True / False
True
A balance sheet with current asset and plant and equipment sections is an unclassified balance sheet.
True / False
False
The last step is the accounting cycle is optional.
True / False
True
The reversing entry for an adjusting entry that debited Accounts Receivable and credited Fees Earned would be a debit to Fees Earned and a credit to Accounts Receivable.
True / False
True
The recurring steps performed each accounting period, starting with recording transactions in the journal and continuing through the post-closing trial balance, are called the _______________ cycle.
ACCOUNTING
A balance sheet that presents the assets and liabilities in relevant subgroups is called a _______________
balance sheet.
CLASSIFIED
_______________ entries update the owner's capital account for the events of the period just finished.
CLOSING
_______________ assets are cash or other assets that are expected to be sold, collected, or used within the longer of one year or the company's operating cycle.
CURRENT
_______________ liabilities are obligations due to be paid or settled within the longer of one year or the operating cycle.
CURRENT
The Income Summary account is an example of a _______________ account, an account that is closed at the end of the reporting period.
TEMPORARY
Long-term assets (resources used to produce or sell products or services) that lack physical form and their benefits are uncertain are called _______________ assets.
INTANGIBLE
Assets such as notes receivable or investments in stocks and bonds which are held for more than one year or the operating cycle are called _______________ investments.
LONG-TERM
A twenty-year mortgage note is an example of a _______________ liability.
LONG-TERM
The terms temporary accounts and _______________ accounts refer to the same type of account.
NOMINAL
The average time between paying cash for employee salaries or merchandise and receiving cash from customers is called the _______________ of a business.
OPERATING CYCLE
The owner's claim on the assets of a company is called the owner's _______________.
EQUITY
Accounts that are used to report on activities related to one or more future accounting periods, and whose balances are carried into the next period, are called real or _______________ accounts.
PERMANENT
Plant and equipment is sometimes referred to as _______________ assets.
PLANT
A list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted is called a _______________ trial balance.
POST-CLOSING
Statements that show the effects of the proposed transactions as if the transactions had already occurred are called _______________ statements.
PRO FORMA
The optional entries recorded at the beginning of a new year that prepare the accounts for simplified journal entries subsequent to accrual adjusting entries are called _______________ entries.
REVERSING
Accounts that are used to describe revenues, expenses, and owner's withdrawals for one accounting period are called _______________ or nominal accounts.
TEMPORARY
An _______________ balance sheet broadly groups the assets, liabilities and owner's equity.
UNCLASSIFIED
A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements is called a _______________.
WORK SHEET
_______________ papers are internal documents that are used to assist the preparers in doing the analyses and organizing the information for reports to be presented to internal and external decision makers.
WORKING
A balance sheet that presents the assets and liabilities in relevant subgroups.
Classified balance sheet
A step at the end of the accounting period that prepares accounts for recording the transactions of the next period.
Closing process
Cash or other assets that are expected to be sold, collected, or used within the longer of one year or the company's operating cycle.
Current assets
A temporary account used only in the closing process to where the balances of revenue and expense accounts are transferred; its balance equals net income or net loss and is transferred to the owner's capital account or the Retained Earnings account for a corporation.
Income Summary
Assets such as notes receivable or investments in stocks and bonds which are held for more than one year or the operating cycle.
Long-term investments
Another name for temporary accounts.
Nominal accounts
Accounts that are used to report on activities related to one or more future accounting periods; their balances are carried into the next period, and include all balance sheet accounts; real account balances are not closed as long as the company continues to own the assets, owe the liabilities, and have owner's equity; also called real accounts.
Permanent accounts
A list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted; a list of balances for all accounts not closed.
Post-closing trial balance
Another name for permanent accounts.
Real accounts
Accounts that are used to describe revenues, expenses, and owner's withdrawals for one accounting period; they are closed at the end of the reporting period; also called nominal accounts.
Temporary accounts
A balance sheet that broadly groups the assets, liabilities and owner's equity.
Unclassified balance sheet
A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements; an optional step in the accounting process.
Work sheet
