Accounting Cycle

Question 1

What is The Worksheet?

Answer 1

The Worksheet is an informal tool used to find errors quickly, without combing through ledgers.

Question 2

The Worksheet shows _____ ______, adjustments to correct improper ______ ______, an _______ trial balance, and financial statement ________ ______.

Answer 2

The worksheet shows trial balance, adjustments to correct improper ledger balances, an adjusted trial balance, and financial statement account balances.

Question 3

Are Worksheets used in computerized accounting systems?

Answer 3

No, Worksheets are usually used in manual accounting systems.

Question 4

What is the purpose of periodically adjusting journal entries?

Answer 4

Adjusting journal entries is done periodically to correct improper account ledger balances.

Question 5

Adjusting Journal Entries are used to account for _____ or _______ _______ that affect more than one accounting period.

Answer 5

Adjusting journal entires are used to account for revenue or expense transactions that affect more than one accounting period.

Question 6

Adjusting entries must be reflected in which two places?

Answer 6

Every adjusting entry affects both an Income Statement and a Balance Sheet account

Question 7

Adjusting journal entries must align with both the _____ Principle and the _____ Principle.

Answer 7

Adjusting income entries must align with the realization principle and the matching principle.

Question 8

What is the Realization Principle?

Answer 8

The realization principle states that Revenue must be recorded when earned.

Question 9

What is the Matching Principle?

Answer 9

The Matching Principle states that expense must be recorded when incurred.

Question 10

The Balance Sheet lists balance of accounts in which categories?

Answer 10

The balance sheet lists balances of accounts in Asset, Liability and Equity account categories

Question 11

The Balance Sheet is a snapshot of a specific date and time. True or False

Answer 11

True

Question 12

Assets = Liabilities + Equity

Answer 12

Accounting Equation

Question 13

A classified balance sheet splits assets into what three groups:

Answer 13

1. Current Assets, 2. Property Plant and Equipment, 3. Long Term Assets

Question 14

A classified balance sheet splits liabilities into what two groups:

Answer 14

1. Current Liabilities, 2. Long-term Liabilities

Question 15

What does the Income statement list?

Answer 15

The income statement lists period ending balances of accounts in Revenue and Expense account categories.

Question 16

Where are Income Statement Balances transferred from?

Answer 16

The Income Statement balances are transferred from the Adjusted Trial Balance on Worksheet.

Question 17

Revenue- Expenses=Net Income for an accounting period

Answer 17

Revenue - Expenses = Net Income for an accounting period.

Question 18

What 4 sections is a Multi-Step Income Statement divided into:

Answer 18

1. Revenue, 2. Cost of Goods Sold, 3. Operating Expenses, and 4. Other Expenses.

Question 19

What does a single-step income statement show?

Answer 19

Revenue - Expenses = Net income (In summary format)

Question 20

The Income Statement is also called 1._____ or 2._____

Answer 20

1. Statement of Profit & Loss or 2. Statement of Operations

Question 21

The Statement of Retained Earnings formula:

Answer 21

Beginning Retained Earnings + Net Income - Dividend payments to Shareholders = Ending Retained Earnings

Question 22

How is the Statement of Retained Earnings related to the Income Statement?

Answer 22

Net Income increases the Retained Earnings account balances, while a net loss decreases it.

Question 23

What does the Statement of Retained Earnings do?

Answer 23

Explains changes in the amount of the owners’ level of investment in the business over an accounting period.

Question 24

The Statement of Cash Flows is essentially an analysis of what?

Answer 24

The Statement of Cash Flows is essentially an analysis of a business’ checking account.

Question 25

What does the Statement of Cash Flows summarize?

Answer 25

The Statement of Cash Flows summarizes the company’s cash receipts and cash payments over an accounting period.

Question 26

The Statement of Cash Flows separates cash inflows and outflows into what 3 categories?

Answer 26

1. Operating, 2. Investing, 3. Financing

Question 27

The Statement of Cash Flows measures what?

Answer 27

The statement of cash flows measures a company’s ability to operate profitably and remain solvent.

Question 28

Closing journal entries reset what temporary accounts to zero?

Answer 28

Revenue and Expense

Question 29

How are Revenue and Expense accounts closed?

Answer 29

Revenue and Expense accounts are closed via a journal entry to the Income Summary and the Income Summary is then closed out into the Retained Earnings Account.

Question 30

What is the After-closing Trial Balance prepared to check for?

Answer 30

An after-closing Trial Balance is prepared to check that Total Debits = Total Credits

Question 31

Name the 8 steps of the accounting cycle:

Answer 31

1. Journalize Transactions, 2. Post to Ledger Accounts, 3. Prepare a Trial Balance, 4. Make Adjusting Entries, 5. Prepare Adjusted Trial balance, 6. Prepare Financial Statements (Balance sheet, income stmt, stmt of retained earnings, stmt of cash flows) 7. Journalize Closing entries, 8. Prepare Post-closing Trial balance