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Accounting > Accounting Chap 6 > Flashcards

Accounting Chap 6 Flashcards

1
Q

Used for three major end-of-period activities:
 Journalizing adjusting entries
 Preparing financial statements
 Journalizing closing entries

A

THE WORK SHEET

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2
Q

PREPARING FINANCIAL STATEMENTS

A

1st: Prepare the income statement.
2nd: Prepare the statement of owner’s
equity.
3rd: Prepare the balance sheet.

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3
Q 
The Financial Statements
Appearance
1. Dollar signs are placed at the \_\_\_ and \_\_\_ rulings.
2. Single rulings indicate \_\_\_.
3. Double rulings are placed under \_\_\_.
4. Headings contain the:
a) company name
b) statement title
c) period ended or date
A

top of each column
beneath

addition or subtraction

totals

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4
Q

___ of financial statements relate to who, what, and when.

A

Headings

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5
Q

___ columns of the work sheet provide the information needed to prepare the income statement.
___ is listed first on income statement.

A

Income Statement

Revenue

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6
Q

___ are listed after revenue on income statement.

a) They could be listed in the ___ that they appear in the chart of accounts.
b) They could be listed in ___ order by dollar amount.
c) Amounts are itemized in the ___ column, when two columns are used.
d) Subtotals appear in the ___ column.

A

Expenses

same order

descending

left

right

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7
Q

Income Statement Equation

___ – ___ = Net Income or Net Loss

A

Revenues

Expenses

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8
Q

The Statement of Owner’s Equity Information is taken from the ___ columns of the work sheet and Net income/loss from the ____.

A

Balance Sheet

Income Statement

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9
Q

What information is taken from the Balance Sheet columns of the work sheet to prepare the Statement of Owner’s Equity

A

Capital account balance & Drawing account balance

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10
Q

The Balance Sheet Information is taken from the ___ columns of the work sheet and Ending balance from the ____.

A

Balance Sheet

Statement of Owner’s Equity

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11
Q

Types of balance sheets

A

a) Report form
b) Account form
c) Classified balance sheet

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12
Q

1st important feature of Balance sheet type where The liabilities and owner’s equity are shown below the assets section.

A

Report form balance sheets

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13
Q

Balance sheet type where

(1) The assets are listed on the left.
(2) The liabilities and owner’s equity sections are listed on the right.

A

Account form balance sheets

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14
Q

2nd important feature of Balance sheet type where
(1) Similar items are grouped together.
(2) The major balance sheet classifications are
generally used ie: Current assets, Property, plant, equipment, Current Liabilities, Long-term liabilities or long-term debt

A

Classified balance sheet

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15
Q

___ include cash and items that will be converted into cash within one year or the normal operating cycle of the business whichever is longer.

A

Current assets

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16
Q

An ___ is the period of time required to purchase supplies and services and convert them back into cash.

A

operating cycle

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17
Q

Property, plant, and equipment, also called ___ or ___ assets, are assets that are expected to serve the business for many years.

A

plant assets

long-term

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18
Q

___ include accounts payable, wages payable, and other items due within one year or the normal operating cycle.

A

Current liabilities

19
Q

___ or ___ are obligations that are not expected to be paid within a year and do not require the use of current assets

A

Long-term liabilities

long-term debt

20
Q

CLASSIFIED BALANCE SHEET

A 
 Similar items are grouped together
 Assets are classified as:
    Current Assets
    Property, Plant, and Equipment
 Liabilities are classified as:
    Current Liabilities
    Long-Term Liabilities
21
Q

Assets (including cash) that will be converted into cash or consumed within one year or the normal operating cycle, whichever is longer
Examples:
 Cash, accounts receivable, supplies, and prepaid insurance

A

CURRENT ASSETS

22
Q

Assets that are expected to serve the business for many years
 Also called plant assets or long-term assets
Examples:
 Land, buildings, and equipment

A

PROPERTY, PLANT, AND EQUIPMENT

23
Q

Liabilities that are due within one year or the normal operating cycle of the business, whichever is longer
 They will be paid out of current assets
 Examples:
 Accounts payable
 Wages payable

A

CURRENT LIABILITIES

24
Q

Obligations that are not expected to be paid within a year and do not require the use of current assets
Also called long-term debt
 Example:
 A mortgage on an office building

A

LONG-TERM LIABILITIES

25
Q

 Gives temporary accounts “zero” balances so they are prepared to
accumulate new information for the next accounting period
 Involves “four” closing journal entries
 The income summary (expense and revenue summary) account is used to aid in the closing process

A

THE CLOSING PROCESS

26
Q

Contain the results of all transactions since the business started, their balances are carried forward to each new accounting period. All accounts reported on the balance sheet
 Assets (including contra-assets)
 Liabilities
 Capital account
 These accounts are ___ at end of fiscal year

A

PERMANENT ACCOUNTS

NOT CLOSED

27
Q

Accumulate information for a specific (one) accounting period
All accounts not on the balance sheet
 Revenues
 Expenses
 Drawing
 These accounts are ___ at end of fiscal year

A

TEMPORARY ACCOUNTS

CLOSED

28
Q

Accounts reported on the balance sheet are ___ and remain ___. All other accounts (those reported on the income statement and drawing) are ___ and ___.

A

permanent
open

temporary
closed

29
Q

Income Summary is a ___ owner’s equity account used in the closing process to give accounts which are temporary a zero balance.

A

temporary

30
Q

Steps in the Closing Process

A

Step 1: Close Revenue Accounts to Income Summary
Step 2: Close Expense Accounts to Income Summary
Step 3: Close Income Summary to Owner’s Capital Account
Step 4: Close Drawing to the Owner’s Capital Account

31
Q

Close Revenue Accounts to Income Summary.

a) ___ the revenue accounts.
b) ___ Income Summary.

A

Debit

Credit

32
Q

Close Expense Accounts to Income Summary.

a) ___ Income Summary.
b) ___ the expense accounts.

A

Debit

Credit

33
Q

Close Income Summary to Owner’s Capital Account

If Net income (credit bal)

(1) ___ Income Summary.
(2) ___ the owner’s capital account.

If Net loss (debit bal)

(1) ___ the owner’s capital account
(2) ___ Income Summary.

A

Debit
Credit

Debit
Credit

34
Q

Close Drawing to the Owner’s Capital Account.

a) ___ the owner’s capital account.
b) ___ Drawing.

A

Debit

Credit

35
Q

Journalize Closing Entries

A
  1. Journalize the closing entries on the year-end date.
  2. Write “Closing Entries” in the Description column prior to making the first closing entry.
  3. Explanations are not required in the Description column for individual closing entries.
  4. Make one compound entry to close the expense accounts.
36
Q

Post the Closing Entries

A
  1. Post to the general ledger in the same manner as all other entries.
  2. Write “Closing” in the Item column of the general ledger to identify the closing entries.
  3. Zero account balances are recorded by drawing a line in both the Balance Debit and Credit columns.
37
Q

Prepared after closing entries To prove the equality of the debit and credit balances in the general ledger accounts
Only permanent accounts that remain open are listed

A

POST-CLOSING TRIAL BALANCE

38
Q

All amounts reflected on the post-closing trial balance are the ___ as in the Balance Sheet columns of the work sheet except ___ and ___ which are changed during the closing process.

A

same

drawing
capital

39
Q

The Accounting Cycle (During Accounting Period)

A
  1. Analyze source documents.
  2. Journalize the transactions.
  3. Post to the general ledger accounts.
40
Q

Operating Cycle for a Service Business

A
  1. Start with Cash
  2. Purchase Supplies and Services
  3. Provide Services for Cash and “On Account”
  4. Collect Receivables
  5. Back to Cash
41
Q

One benefit of using the ___ account is that its balance before closing to the capital account equals the net income or net loss for the period. It can serve as a check of the accuracy of the closing entries for revenues and expenses even though not really needed for closing process.

A

Income Summary

42
Q

Steps involved in accounting for all of the business activities during an accounting period. Begins with analysis of source documents and ends with post-closing trial balance.

A

Accounting cycle

43
Q

The Accounting Cycle (End of Accounting Period)

*Performed as of the last day

A
  1. Prepare a trial balance.
  2. Determine and prepare the needed adjustments on the work sheet.
  3. Complete an end-of-period work sheet.
  4. Journalize and post the adjusting entries.
  5. Prepare an income statement, a statement of owner’s equity, and a balance sheet.
  6. Journalize and post the closing entries.
  7. Prepare a post-closing trial balance.

Accounting (9 decks)

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