Topic 3

Question 1

A permanent general ledger account is one that

Answer 1

carries its balance forward from one accounting period to the next

Question 2

A, L, OE, and asset CON accounts are _____ accounts

Answer 2

permanent

Question 3

A _______general ledger account is one that begins each new accounting period with a zero balance.

Answer 3

temporary

Question 4

R, E, and revenue/expense CON accounts are ______ accounts

Answer 4

temporary

Question 5

_______ accounts are the ingredients of a statement of financial position

Answer 5

permanent

Question 6

__________ general ledger accounts are the ingredients of a statement of comprehensive income

Answer 6

temporary

Question 7

The Income Summary account is itself a _______ general ledger account, and therefore it also must be closed off in order to begin the new year with a ____ balance.

Answer 7

temporary, zero

Question 8

The Income Summary account is closed off to a ______ general ledger account called ______.

Answer 8

permanent, “retained earnings” ( RE)

Question 9

The “ retained earnings” account is an ___ account and, as such, it appears in the sharholders’ equity section of a company statement of_________

Answer 9

OE, financial position

Question 10

The “negative owners’ equity” CON accounts are _____general ledger accounts and therefore also _______ at the end of each accounting period.

Answer 10

temporary, closed off

Question 11

But instead of being closed off to Income Summary, “negative owners’ equity” CON accounts are closed off directly to the ______ account.

Answer 11

RE

Question 12

we shall refer to “negative owners’ equity” CON accounts as _________accounts.

Answer 12

negative appropriation

Question 13

“negative owners’ equity” CON accountshave the effect of reducing ______

Answer 13

retained earnings

Question 14

4 most common negative appropriation general ledger accounts:

• interim ______ paid a/c
• final _______ declared a/c
• transfer to [name] reserve a/c
• transfer from [name] reserve a/c

Answer 14

dividends

Question 15

Broadly speaking, dividends can be of two types - ____ and _____

Answer 15

interim and final

Question 16

In turn, any dividend (interim or final) can be usefully regarded as progressing through three distinct stages:

• the _______by directors that a dividend be paid;
• the_________ (that is, formal confirmation) of the dividend;
• the________ of the dividend.

Answer 16

recommendation
declaration
subsequent payment

Question 17

In the case where directors do not have the constitutional power to declare dividends _____ (that is, where directors must seek shareholder approval prior to paying a dividend), no accounting entries must be made until ______for payment arrives.

Answer 17

unilaterally

the actual day

Question 18

The recommendation, the declaration, and the payment of an _____dividend occur wholly within the same financial year. This stands in marked contrast to a _____ dividend.

Answer 18

interim, final

Question 19

Regardless of when declaration takes place, however, the ______payment of a final dividend will always take place in the next financial period. This is because it takes time to physically prepare and draw dividend cheques and/or transfer funds to eligible shareholders.

Answer 19

actual

Question 20

Accounting for interim dividends:

When directors recommend an _____dividend, they are assumed (in ACC80006) to also have the power to simultaneously ______and _____the dividend. This will trigger the following journal entry:

Dr Interim dividend paid
Cr Bank

The _____is to a negative appropriation account, whereas the _____is to an asset account. At year end, the following balance day ______is made to close the negative appropriation account:

Dr Retained earnings
Cr Interim dividend paid

Answer 20

interim ; declare ; pay

debit ; credit ; adjustment

Question 21

for theoretical purity and consistency, as well as for Topic 6 purposes later in the ACC80006 syllabus, you are requested to use a _________ account for all dividends, and close these accounts by way of balance day ________.

Answer 21

negative appropriation ; adjustments

Question 22

Equity, in the company form of organisation, is classified into three main parts:_____, _____, _____

Answer 22

capital, other reserves, retained earnings

Question 23

Another name “negative owners’ equity”

Answer 23

“Negative appropriation”

Question 24

The RE account is also known under a variety of different names or synonyms - ______________ just to name a few.

Answer 24

retained profits, 
profit and loss appropriation, 
income appropriation, 
unappropriated profits, 
or accumulated profits/losses