Exam 4: Completing the Accounting Cycle

Match the following terms with the appropriate definition. A.Permanent accounts B.Accounting cycle C.Temporary accounts D.Working papers E.Income summary F.Work sheet G.Closing entries H.Post-closing trial balance I.Operating cycle of a business J.Pro forma statements ____ 1.Analyses and other informal reports prepared by accountants when organizing the information presented in reports and financial statements.____ 2.The time span from when cash is used to acquire goods and services until cash is received from the sale of those goods and services.____ 3.A temporary account used only in the closing process and to where the balances of revenue and expense accounts are transferred.____ 4.A spreadsheet used to draft an unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements.____ 5.A list of permanent accounts and their balances from the ledger after all closing entries are journalized and posted.____ 6.Recurring steps performed each accounting period, starting with analyzing and recording of transactions in the journal and continuing through the post-closing trial balance (or reversing entries).____ 7.Entries recorded at the end of each accounting period to transfer end-of-period balances in revenue, expense, and withdrawals accounts to the permanent owner's capital account.____ 8.Statements that show the effects of proposed transactions as if the transactions had already occurred.____ 9.Accounts that reflect on activities related to one or more future periods; they include all balance sheet accounts.____10.Accounts that are used to record transactions and events for one accounting period only; they include revenues, expenses, and withdrawals.

The third closing entry is to close Owner's Capital to the Owner's Withdrawals account.

Permanent accounts include all of the following except:

On the work sheet,net income is entered in the Income Statement Credit column as well as the Balance Sheet or Statement of Owner's Equity Debit column.

Statements that show the effects of proposed transactions as if the transactions had already occurred are called:

Plant assets are usually listed in order from most liquid to least liquid.

Which of the following statements about a company's operating cycle is not true:

Presented below are the year-end balances at December 31 of Laura's Laundry Service.(All accounts have normal balances.) (a)Prepare the necessary closing entries at December 31. (b)Prepare a post-closing trial balance at December 31.

The closing process is necessary in order to:

The ___________________ account is used only in the closing process.

Closing the temporary accounts at the end of each accounting period does all of the following except:

After posting the entries to close all revenue and expense accounts,Hatfield Company's Income Summary account has a credit balance of $6,000,and its Hatfield,Withdrawals account has a debit balance of $2,500.These balances indicate that net income for the current accounting period amounted to $3,500.

A work sheet is a tool to help organize information needed in adjusting the accounts and preparing the financial statements.

The withdrawals account is normally closed by debiting it.

The unadjusted trial balance of Quick Delivery is entered on the partial work sheet below.Complete the work sheet using the following information: (a)Salaries earned by employees that are unpaid and unrecorded,$5,000. (b)An inventory of supplies showed $1,000 of unused supplies still on hand. (c)Depreciation on delivery vans,$24,000. (d)Services paid in advance by customers of $10,000 have now been provided to customers.

Closing entries are designed to transfer the end-of-period balances in the revenue accounts,the expense accounts,and the withdrawals account to owner's capital.

Closing entries are necessary so that owner's capital will begin each period with a zero balance.

Which of the following errors would cause the Balance Sheet and Statement of Owner's Equity columns of a work sheet to be out of balance?

The Income Summary account is used to close the permanent accounts at the end of an accounting period.

The Adjusted Trial Balance of Bade Cleaning Service is entered on the partial work sheet below.Complete the work sheet by extending the account balances into the appropriate financial statement columns and by entering the amount of net income for the reporting period: