Question: Working capital is
Answer Choices: a. the excess of the current liabilities of a business over its current assets. b. the excess of the current assets of a business over its current liabilities. c. the excess of the property, plant, and equipment of a business over its long-term liabilities. d. None of these choices are correct.
Answer: b. the excess of the current assets of a business over its current liabilities.
Question: The listing of expenses on the income statement is ordered
Answer Choices: a. by size, beginning with the largest item and putting miscellaneous expense as the last item. b. alphabetically. c. by size, beginning with the smallest item. d. by account number in the general ledger.
Answer: a. by size, beginning with the largest item and putting miscellaneous expense as the last item.
Question: Based on these data, a supplier would be more eager to extend credit to which company?
Answer Choices: a. would be equally eager to extend credit to both companies. b. would be more eager to extend credit to Action Company. c. would not be eager to extend credit to either company. d. would be more eager to extend credit to Brown Company.
Answer: d. would be more eager to extend credit to Brown Company.
Question: Revenue accounts appear on the _____.
Answer Choices: a. income statement b. balance sheet c. statement of owner’s equity d. None of these choices are correct.
Answer: a. income statement
Question: Which of the following accounts will NOT be closed at the end of the accounting cycle?
Answer Choices: a. Nominal accounts b. Temporary accounts c. Real accounts d. Revenue accounts
Answer: c. Real accounts
Question: Which of the following steps is optional in the accounting cycle?
Answer Choices: a. A post-closing trial balance is prepared. b. Adjusting entries are journalized and posted to the ledger. c. An end-of-period spreadsheet is prepared. d. An unadjusted trial balance is prepared.
Answer: c. An end-of-period spreadsheet is prepared.
Question: A company’s net income or net loss for a period is determined during which of the following steps of the accounting cycle?
Answer Choices: a. When a post-closing trial balance is prepared b. When an unadjusted trial balance is prepared c. When transactions are posted to the ledger d. When financial statements are prepared
Answer: d. When financial statements are prepared
Question: The journal entry required to close the Drawing account is _____.
Answer Choices: a. a debit to Income Summary account and a credit to Drawing account b. a debit to Capital account and a credit to Drawing account c. a debit to Capital account and a credit to Cash account d. None of these choices are correct.
Answer: b. a debit to Capital account and a credit to Drawing account
Question: The balance of the owner’s drawing account on the adjusted trial balance of the end-of-period spreadsheet is reported on which of the following financial statements?
Answer Choices: a. Balance sheet b. Statement of owner’s equity c. Income statement d. All of these choices are correct.
Answer: b. Statement of owner’s equity
Question: Which of the following statements regarding the flow of information from the adjusted trial balance on the end-of-period spreadsheet is NOT true?
Answer Choices: a. The owner’s capital and drawing account balances flow into the statement of owner’s equity. b. The revenue and expense account balances flow into the income statement. c. The cash account is reported on the income statement. d. The asset and liability account balances flow into the balance sheet.
Answer: c. The cash account is reported on the income statement.
Question: Which of the following statements regarding the income statement is true?
Answer Choices: a. It must be prepared before the statement of owner’s equity. b. It is prepared using the account balances shown in the Adjusted Trial Balance columns of the end-of-period spreadsheet. c. Miscellaneous Expense is listed as the last expense item, regardless of its amount. d. All of these choices are correct.
Answer: d. All of these choices are correct.
Question: When pulling the owner’s capital balance from the end-of-period spreadsheet into the statement of owner’s equity, why is it also important to check the detail in the owner’s capital account in the general ledger?
Answer Choices: a. There may have been additional revenue made during the year reflected in the balance. b. There may have been additional losses incurred during the year reflected in the balance. c. There may have been additional withdrawals made during the year reflected in the balance. d. There may have been additional investments made during the year reflected in the balance.
Answer: d. There may have been additional investments made during the year reflected in the balance.
Question: All of the following accounts will appear on the post-closing trial balance except _____.
Answer Choices: a. accounts payable b. accounts receivable c. depreciation expense d. None of these choices are correct.
Answer: c. depreciation expense
Question: The following are SOME of the steps in the accounting cycle. Which of the following reflects the steps in the correct order?
Answer Choices: a. C, B, A, E, D b. A, D, E, B, C c. E, A, D, B, C d. D, B, A, C, E
Answer: d. D, B, A, C, E
Question: Which account will not appear on the post-closing trial balance?
Answer Choices: a. Revenue b. Cash c. Accounts Receivable d. Accounts Payable
Answer: a. Revenue
Question: The journal entry for cash received from cash clients for fees earned during the current period would include
Answer Choices: a. a credit to Cash. b. a credit to Accounts Receivable. c. a credit to Fees Earned. d. None of these choices are correct.
Answer: c. a credit to Fees Earned.
Question: The ability to convert assets into cash is called
Answer Choices: a. currency. b. solvency. c. capitalization. d. liquidity.
Answer: d. liquidity.
Question: From the list that follows, identify the accounts that should be closed to the owner’s capital account at the end of the fiscal year:
Answer Choices: a. Accounts Receivable b. Accumulated Depreciation c. Building d. Depreciation Expense e. Fees Earned f. Jackie Lindsay, Capital g. Jackie Lindsay, Drawing h. Land i. Supplies j. Supplies Expense k. Unearned Rent l. Wages Expense
Answer: d. Depreciation Expense, e. Fees Earned, g. Jackie Lindsay, Drawing, j. Supplies Expense, l. Wages Expense
Question: The following accounts are closed at the end of the accounting period except _____.
Answer Choices: a. revenue b. expenses c. withdrawals d. capital
Answer: d. capital
Question: Owner withdrawals would appear on the _____.
Answer Choices: a. income statement b. balance sheet c. statement of owner’s equity d. None of these choices are correct.
Answer: c. statement of owner’s equity
Question: What is the purpose of the owner’s capital account in the closing process?
Answer Choices: a. Owner’s Capital is where the period’s net income or loss is transferred. b. Owner’s Capital is used as a temporary account. c. Owner’s Capital is a clearing account used to zero out all real accounts. d. Owner’s Capital is used to verify that net income or loss is reported correctly.
Answer: a. Owner’s Capital is where the period’s net income or loss is transferred.