True/False
Indicate whether the
statement is true or false.
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1.
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General ledger account balances are changed only by posting journal
entries.
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2.
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Information needed for journalizing adjusting entries is taken from Income
Statement and Balance Sheet columns of a work sheet.
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3.
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Information needed for journalizing closing entries is taken from the Adjustment
columns of a work sheet.
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4.
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Indicating a source document is not necessary when journalizing adjusting
entries.
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5.
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At the end of a fiscal period, the temporary accounts are closed to prepare the
general ledger for the next fiscal period.
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6.
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Income Summary is a temporary account and is used only at the beginning of a
fiscal period.
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7.
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Income Summary has a debit balance.
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8.
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Amounts needed for the closing entries are obtained from the Trial Balance
columns of a work sheet.
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9.
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The income summary account is a temporary account and must begin each fiscal
period with a zero balance.
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10.
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Adjusting entries bring subsidiary ledger accounts up to date.
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11.
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Adjusting entries recorded in a work sheet are journalized in a general
journal.
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12.
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Adjusting entries are recorded on the next line following the last daily
transaction.
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13.
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Closing temporary accounts at the end of a fiscal period is an application of
the Matching Expenses with Revenue accounting concept.
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14.
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To close a temporary account, an amount equal to its balance is recorded on the
side opposite the balance.
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15.
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Permanent accounts are sometimes referred to as nominal accounts.
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16.
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The ending account balances of permanent accounts for one fiscal period are the
beginning account balances for the next fiscal period.
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17.
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Contra accounts with credit balances are closed by crediting the accounts and
debiting Income Summary.
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18.
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Expense accounts are closed by crediting the expense accounts and debiting
Income Summary for the total amount.
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19.
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The income summary account is closed into the retained earnings account.
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20.
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Dividends increase the earnings retained by a corporation.
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21.
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After the closing entry for the dividends account is posted, Dividends has a
zero balance.
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22.
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After all closing entries are posted, the income statement accounts are the only
general ledger accounts that have balances.
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23.
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Income statement accounts with zero balances to begin the new fiscal year is an
application of the Business Entity accounting concept.
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24.
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The purpose of the post-closing trial balance is to prove the general ledger
equality of debits and credits.
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25.
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The first steps in the accounting cycle for a merchandising business are to
check source documents for accuracy and analyze transactions into debit and credit parts.
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26.
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The final step in the accounting cycle for a merchandising business is to
prepare financial statements from the work sheet.
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27.
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Permanent accounts include the asset and liability accounts as well as the
owners' capital accounts.
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28.
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The income summary account is unique because it does not have a normal balance
side.
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29.
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Service and merchandising businesses use totally different accounting
cycles.
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30.
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Income Summary is used only at the end of the fiscal period to help prepare
other accounts for a new fiscal period.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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31.
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The two types of journal entries needed to change general ledger account
balances at the end of the fiscal period are ____.
a. | adjusting and correcting entries | c. | adjusting and closing
entries | b. | closing and correcting entries | d. | none of the
above |
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32.
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Information needed for journalizing adjusting entries is taken from the
____.
a. | Trial Balance columns of a work sheet | b. | Adjustments columns of a work
sheet | c. | Income Statement columns of a work sheet | d. | Balance Sheet
columns of a work sheet |
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33.
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Recording closing entries to prepare temporary accounts for the next fiscal
period is an application of the accounting concept ____.
a. | Matching Expenses with Revenue | c. | Accounting Period
Cycle | b. | Adequate Disclosure | d. | Consistent Reporting |
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34.
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The store supplies inventory adjustment includes a debit to Supplies
Expense--Store and a credit to ____.
a. | Income Summary | c. | Purchases | b. | Merchandise Inventory | d. | Supplies--Store |
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35.
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The amounts needed for closing entries are obtained from the work sheet's
____.
a. | Trial Balance and Balance Sheet columns | b. | Adjustments and
Balance Sheet columns | c. | Income Statement and Balance Sheet
columns | d. | Balance Sheet columns |
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36.
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Each revenue account must begin each fiscal period with a ____.
a. | debit balance | b. | credit balance | c. | zero
balance | d. | balance reflecting net income from the previous
period |
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37.
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To close the revenue account, the revenue account balance for the fiscal period
is transferred into ____.
a. | the income summary account | c. | the cash
account | b. | the capital accounts | d. | none of the above |
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38.
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Having each cost and expense account begin a new fiscal period with a zero
balance is an application of the accounting concept ____.
a. | Accounting Period Cycle | c. | Matching Expenses with
Revenue | b. | Adequate Disclosure | d. | Consistent Reporting |
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39.
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To close the sales account, ____.
a. | debit Sales; credit Cash | c. | debit Income Summary; credit
Sales | b. | debit Sales; credit Income Summary | d. | debit Cash; credit
Sales |
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40.
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To close the expense and cost accounts, ____.
a. | debit the expense and cost accounts; credit Income Summary | b. | debit the expense
accounts; credit the capital accounts | c. | debit Income Summary; credit the expense and
cost accounts | d. | debit Income Summary; credit the capital accounts |
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41.
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To close the income summary account when there is net income, ____.
a. | debit Cash; credit Income Summary | b. | debit the capital accounts; credit Income
Summary | c. | debit Income Summary; credit Retained Earnings | d. | debit Retained
Earnings; credit Income Summary |
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42.
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To close the dividends account, ____.
a. | debit Retained Earnings and credit Dividends | b. | debit Dividends and
credit Retained Earnings | c. | debit Income Summary and credit
Dividends | d. | debit Dividends and credit Income Summary |
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43.
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Which journal entries change general ledger account balances at the end of a
fiscal period?
a. | Adjusting entries | c. | Both A and B | b. | Closing entries | d. | Neither A nor B |
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44.
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Temporary accounts include ____.
a. | revenue accounts | c. | expense accounts | b. | cost accounts | d. | all of the
above |
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45.
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Which income statement accounts have zero balances to begin a new fiscal
period?
a. | Revenue accounts | c. | Expense accounts | b. | Cost accounts | d. | All of the
above |
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46.
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Which balance sheet accounts have up-to-date balances to begin a new fiscal
period?
a. | Asset accounts | c. | Capital accounts | b. | Liability accounts | d. | All of the
above |
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47.
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Merchandising businesses use an accounting cycle similar to the accounting cycle
of ____.
a. | Service businesses | c. | Proprietorships | b. | Corporations | d. | All of the
above |
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48.
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To reduce the debit balances of income statement accounts to zero, ____.
a. | debit the income statement accounts and credit Income Summary | b. | debit Income Summary
and credit the income statement accounts | c. | debit the income statement accounts and credit
Retained Earnings | d. | debit Retained Earnings and credit the income
statement accounts |
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49.
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Which of the following is not a closing entry for a corporation?
a. | Closing entry for adjustments | b. | Closing entry for income statement
accounts | c. | Closing entry for the dividends account | d. | Closing entry to
record net income or net loss in the retained earnings account |
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50.
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After adjusting and closing entries have been posted to the general ledger, a
____.
a. | balance sheet is prepared | b. | trial balance is prepared | c. | post-closing balance
sheet is prepared | d. | post-closing trial balance is
prepared |
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