CHAPTER 4 T/F

Cross-referencing is useful in assuring that the debits and credits are in balance.

When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are simply added to the account title column.

Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements.

The most important output of the accounting cycle is the financial statements.

The work sheet is not considered a part of the formal accounting records.

After analyzing transactions, the next step would be to post the transactions in the ledger.

The usual presentation of the statement of owner's equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner's contributions, (5) Ending capital.

On the income statement, miscellaneous expenses are usually presented as the last item without regard to the dollar amount.

Round tripping is a fraudulent scheme where business A artificially inflates revenue by lending money to customer B who uses that money to buy products from A.

The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.

Land is an example of a plant asset.

Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets.

There is really no benefit in preparing financial statements in any particular order.

Prepaid Insurance is an example of a current asset.

Accrued revenues are ordinarily listed on the balance sheet as current liabilities.

Liabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities.

Capital and Drawing are reported in the owner's equity section of the balance sheet.

Accrued expenses are ordinarily listed on the balance sheet as current assets.

Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as current assets.

Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current assets.

Office Equipment is an example of a current asset account.

At the end of the fiscal period, prepaid expenses are reported on the Income Statement as expenses.

The amount of the net income for a period appears on both the income statement and the balance sheet for that period.

The income statement is prepared from the adjusted trial balance or the income statement columns on the work sheet.

Accrued taxes payable are generally reported on the balance sheet as a current liability.

The income summary account is closed to the owner's capital account.

The accumulated depreciation account is closed to the income summary account.

In a sole proprietorship, a closing entry for the drawing account may not be necessary.

The drawing account is closed to the income summary account.

Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short time before they expire.

The balance sheet accounts are referred to as real or permanent accounts.

The drawing account is a temporary account.

The trial balance prepared after all the closing entries have been posted is called a pre-closing trial balance.

Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period.

Accumulated Depreciation is a permanent account.

Entries required to close the balances of the temporary accounts at the end of the period are called final entries

All income statement accounts will be closed at the end of the period.

Closing entries are entered directly on to the work sheet.

A post-closing trial balance contains only asset and liability accounts.

Balance Sheet are not considered real accounts.

Journalizing and posting closing entries must be completed before financial statements can be prepared.

A post-closing trial balance should be prepared before the financial statements are prepared.

The income summary account is also known as the clearing account.

The post-closing trial balance will generally have fewer accounts than the trial balance.

It is not necessary to post the closing entries to the general ledger.

Once an account has been closed for the period, inserting a line in the balance columns zero's out the account making it ready for the following period.

During the closing process, some balance sheet accounts are closed and end the period with a zero balance.

Assets, liabilities, and owner's capital are real accounts and do not get closed at the end of the period.

The unadjusted, adjusted, and final trial balances are prepared during the accounting cycle of a period.

Financial statements should be prepared before the closing entries are journalized and posted.

The last step of the accounting cycle is to prepare a post-closing trial balance.

The accounting cycle begins with preparing an unadjusted trial balance.

The majority of businesses end their fiscal year on December 31.

Any twelve-month accounting period adopted by a company is known as its fiscal year.

A fiscal year that ends when business activities have reached their lowest point is called the natural business year.

All companies must use a calendar year as their fiscal year.