Chapter 4 Flashcards
Which of the following accounts is a permanent account?
Accounts payable.
When closing entries are made:
All temporary accounts are closed but permanent accounts are not closed.
Revenues and expenses accounts, which are closed at the end of each accounting period, are:
Temporary accounts.
Journal entries that transfer the end-of-period balances in revenue accounts to a permanent equity account are known as:
Closing entries.
The recurring steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through preparing the post-closing trial balance, is referred to as the:
Accounting cycle.
Which of the following is the usual final step in the accounting cycle?
Preparing a post-closing trial balance.
A classified balance sheet:
Organizes assets and liabilities into subgroups.
The usual order for the asset subgroups of a classified balance sheet is:
Current assets, long-term investments, plant assets, intangible assets.
Two common subgroups for liabilities on a classified balance sheet are:
Current liabilities and long-term liabilities.
The current ratio:
Is used to help assess a company’s ability to pay its debts in the near future.
A company shows a $600 balance in Prepaid Rent in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired rent of $200. This adjusting entry results in:
$200 decrease in net income.
The temporary account used only for the closing process that contains a credit for total revenues (and gains) and a debit for total expenses (and losses) is the:
Income Summary account.
The F. Mercury, Capital account has a credit balance of $37,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the F. Mercury, Capital account after all closing entries are made?
$43,400.
Ending Capital Balance = Beginning Capital Balance + Revenues − Expenses − Withdrawals
Ending Capital Balance = $37,000 + $55,200 − $39,800 − $9,000 = $43,400
A list of all permanent accounts and their balances after all closing entries have been made is a(n):
Post-closing trial balance.
Current ratio:
Current Assets/Current Liabilities
