Reversed Chapter (4)

Question 1

The process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.

Answer 1

accounting cycle

Question 2

Another name for the income summary account because it has the effect of clearing the revenue and expense accounts of their balances.

Answer 2

account form

Question 3

The entries that transfer the balances of the revenue; expense; and drawing accounts to the owner’s capital account.

Answer 3

closing entries

Question 4

The transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to Income Summary; transferring the income summary account balance to the owner’s capital account; and transferring the owner’s drawing account to the owner’s capital account.

Answer 4

closing process

Question 5

The process of transferring temporary accounts balances to permanent accounts at the end of the accounting period.

Answer 5

closing the books

Question 6

Cash and other assets that are expected to be converted to cash or sold or used up; usually within one year or less; through the normal operations of the business.

Answer 6

current assets

Question 7

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets.

Answer 7

current liabilities

Question 8

A financial ratio that is computed by dividing current assets by current liabilities.

Answer 8

current ratio

Question 9

The annual accounting period adopted by a business.

Answer 9

fiscal year

Question 10

The number of dollars of sales that are generated from each dollar of average fixed assets during the year; computed by dividing the net sales by the average net fixed assets.

Answer 10

fixed assets

Question 11

An account to which the revenue and expense account balances are transferred at the end of a period.

Answer 11

Income Summary

Question 12

The ability to convert assets into cash.

Answer 12

liquidity

Question 13

Liabilities that usually will not be due for more than one year.

Answer 13

long-term liabilities

Question 14

A fiscal year that ends when business activities have reached the lowest point in an annual operating cycle.

Answer 14

natural business year

Question 15

A customer’s written promise to pay an amount and possibly interest at an agreed-upon rate.

Answer 15

notes receivable

Question 16

Term for balance sheet accounts because they are relatively permanent and carried forward from year to year.

Answer 16

real accounts

Question 17

The ability of a firm to pay its debts as they come due.

Answer 17

solvency

Question 18

Accounts that report amounts for only one period.

Answer 18

temporary accounts

Question 19

The excess of the current assets of a business over its current liabilities.

Answer 19

working capital