Chapter 4--Completing the Accounting Cycle
Student: ___________________________________________________________________________
1. After analyzing transactions, the next step would be to post the transactions in the ledger.
True False

2. The most important output of the accounting cycle is the financial statements.
True False

3. The work sheet is not considered a part of the formal accounting records.
True False

4. Cross-referencing is useful in assuring that the debits and credits are in balance.
True False

5. When accounts do not appear on the unadjusted trial balance but are needed to post adjustments, they are
simply added to the account title column.
True False

6. Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements.
True False

7. There is really no benefit in preparing financial statements in any particular order.
True False

8. Round tripping is a fraudulent scheme where business A artificially inflates revenue by lending money to
customer B who uses that money to buy products from A.
True False


9. On the income statement, miscellaneous expenses are usually presented as the last item without regard to the
dollar amount.



18. At the end of the fiscal period, prepaid expenses are reported on the income statement as expenses.
True False

19. Office Equipment is an example of a current asset account.
True False

20. Capital and Drawing are reported in the owner's equity section of the balance sheet.
True False

21. Deferred expenses that benefit a relatively short period of time are listed on the balance sheet as current
assets.
True False

22. Unearned revenues that will be earned in a relatively short period of time are listed on the balance sheet as
current assets.
True False

23. Accrued expenses are ordinarily listed on the balance sheet as current assets.
True False

24. Accrued revenues are ordinarily listed on the balance sheet as current liabilities.
True False

25. The income statement is prepared from the adjusted trial balance or the income statement columns on the
work sheet.
True False

26. Examples of temporary accounts are supplies and prepaid expenses which are in the ledger for just a short

entries.
True False

36. Journalizing and posting closing entries must be completed before financial statements can be prepared.
True False


37. During the closing process, some balance sheet accounts are closed and end the period with a zero balance.
True False

38. Closing entries are entered directly on to the work sheet.
True False

39. The post-closing trial balance will generally have fewer accounts than the trial balance.
True False

40. A post-closing trial balance contains only asset and liability accounts.
True False

41. A post-closing trial balance should be prepared before the financial statements are prepared.
True False

42. Assets, liabilities, and owner’s capital are real accounts and do not get closed at the end of the period.
True False

43. The income summary account is also known as the clearing account.
True False

44. All income statement accounts will be closed at the end of the period.
True False


54. All companies must use a calendar year as their fiscal year.
True False

55. The majority of businesses end their fiscal year on December 31.
True False


56. The balances of the capital accounts from the Adjusted Trial Balance of the work sheet are extended to the
Statement of Owner’s Equity columns.
True False

57. The work sheet is a working paper that accountants can use to summarize adjusting entries and the account
balances for the financial statements.
True False

58. In a computerized accounting system, a work sheet may not be necessary because the software program
automatically posts entries to the accounts and prepares financial statements.
True False

59. The trial balance may be listed on the work sheet instead of being prepared separately.
True False

60. The totals of the Adjusted Trial Balance columns on a work sheet will always be the sum of the Trial
Balance column totals and the Adjustments column totals.
True False

61. A work sheet heading is dated for a period of time.
True False


True False

70. Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post
them to the ledger.
True False

71. The chart of accounts, the journal, and the ledger are essential parts of the accounting system.
True False

72. The closing process is sometimes referred to as closing the books.
True False

73. Accounts reported on the balance sheet that are carried forward from year to year are known as permanent
accounts.
True False


74. Real accounts are not permanent accounts.
True False

75. In the accounting cycle, the last step is
A. preparing the financial statements
B. journalizing and posting the adjusting entries
C. preparing a post-closing trial balance
D. journalizing and posting the closing entries

76. During the end-of-period processing which of the following best describes the logical order of this process
A. Preparation of adjustments, adjusted trial balance, financial statements
B. Preparation of Income Statement, adjusted trial balance, Balance Sheet
C. Preparation of adjusted trial balance, cross-referencing, journalizing

A. balance sheet in the current assets section
B. balance sheet in the fixed assets section
C. balance sheet in the current liabilities section
D. income statement as an expense

82. Unearned Fees appear on the
A. balance sheet in the current assets section
B. balance sheet as a current liability
C. balance sheet in the owner's equity section
D. income statement as revenue

83. Which one of the fixed asset accounts listed below will not have a related contra asset account?
A. Office Equipment
B. Land
C. Delivery Equipment
D. Building

84. Prepaid insurance is reported on the balance sheet as a
A. current asset
B. fixed asset
C. current liability
D. long-term liability

85. The income statement is prepared from:
A. the adjusted trial balance.
B. the income statement columns of the work sheet.
C. either the adjusted trial balance or the income statement columns of the work sheet.
D. both the adjusted trial balance and the income statement columns of the work sheet.



Accounts Payable
Notes Payable
Bob Steely, Capital
Bob Steely, Withdrawals
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Depreciation Expense
Miscellaneous Expense
Totals

$ 6,530
2,100
700
13,700
$ 1,100
1,900
4,300
12,940
790
9,250
2,500
1,960
775
250
185
$29,490

$29,490


Determine the Owner’s Equity ending balance for the period.

A. $12,150
B. $15,730
C. $6,480
D. $21,400

$ 6,530
2,100
700
13,700
$ 1,100
1,900
4,300
12,940
790
9,250
2,500
1,960
775
250
185
$29,490

$29,490


91. Use the following information in the adjusted trial balance for Stockton Company to answer the following
questions.

9,250
2,500
1,960
775
250
185
$29,490

$29,490

Determine total assets.

A. $24,130
B. $15,830
C. $21,930
D. $23,030
92. Use the following information in the adjusted trial balance for Stockton Company to answer the following
questions.

Stockton Company
Adjusted Trial Balance
For the Year ended December 31, 20XX
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Bob Steely, Capital


A. $23,030
B. $9,330
C. $21,930
D. $8,630
93. Use the following information in the adjusted trial balance for Stockton Company to answer the following
questions.

Stockton Company
Adjusted Trial Balance
For the Year ended December 31, 20XX
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Bob Steely, Capital
Bob Steely, Withdrawals
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Depreciation Expense
Miscellaneous Expense
Totals

$ 6,530
2,100

95. The Statement of Owner’s Equity begins with the beginning balance followed by
A. plus Net Income (loss) less withdrawals
B. plus Net Income (loss) plus investments
C. plus investments less withdrawals
D. plus investments plus Net Income (loss) less withdrawals

96. The Income Statement will include the following accounts
A. Revenues less Expenses (ordered largest to smallest amount) with Miscellaneous Expense listed last
B. Revenues less Expenses (ordered smallest to largest amounts) with Miscellaneous Expense listed last
C. Revenues less Expenses (ordered in alphabetical order)
D. Revenues less Expenses (order is not important)

97. The classified Balance Sheet will subsection the assets section as follows
A. Current Assets and Other Assets
B. Current Assets and Property, Plant, and Equipment
C. Current Assets and Short-Term Assets
D. Other Assets and Property, Plant and Equipment

98. The classified Balance Sheet will divide its Liabilities Section as the following subsections
A. Current Liabilities and Long-Term Liabilities
B. Current Liabilities and Other Liabilities
C. Other Liabilities and Long-Term Liabilities
D. Present Liabilities and Tomorrow’s Liabilities

99. Short-term liabilities are those liabilities that
A. will be paid in less than one year
B. are due to be paid in 5 to 10 years
C. are due to be paid in more than one year
D. are owed to the owner and will never be paid


C. the adjustments account
D. the helpful account

105. After posting the second closing entry to the income summary account, the balance will be equal to
A. zero.
B. owner’s equity.
C. revenues for the period
D. the net income or (loss) for the period.

106. What is the last account that should be listed in the Post Closing Trial Balance?
A. Income Summary
B. Capital account
C. Cash
D. Fees Earned


107. Which of the following account groups are all considered nominal accounts?
A. Cash, Owner’s Equity, Wages Payable
B. Prepaid Insurance, Property, Plant & Equipment, Fees Earned
C. Capital Account, Dividend Account, Income Summary
D. Rent Revenue, Fees Earned, Miscellaneous Expense

108. There are four closing entries. The first one is to close ____, the second one is to close ____, the third one
is to close ____, and the last one is to close ____.
A. Revenues, expenses, income summary, drawing account
B. Expenses, assets, income summary, capital account
C. Capital account, drawing account, income summary, assets
D. Drawing account, income summary, expenses, revenues

109. Closing entries

C. Unearned Rent
D. Depreciation Expense

114. Which of the following accounts will be closed to the Capital account at the end of the fiscal year?
A. Rent Expense
B. Fees Earned
C. Income Summary
D. Depreciation Expense

115. The entry to close the appropriate insurance account at the end of the accounting period is
A. debit Income Summary; credit Prepaid Insurance
B. debit Prepaid Insurance; credit Income Summary
C. debit Insurance Expense; credit Income Summary
D. debit Income Summary; credit Insurance Expense

116. Which of the following accounts ordinarily appears in the post-closing trial balance?
A. Fees Earned
B. Supplies Expense
C. Zane White, Drawing
D. Unearned Rent

117. The post-closing trial balance differs from the adjusted trial balance in that it
A. does not take into account closing entries
B. does not take into account adjusting entries
C. does not include balance sheet accounts
D. does not include income statement accounts

118. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:

Accumulated Depreciation

1/1
12/31

6,500
15,000

Alberto, Drawing
6/30
11/30

3,500
5,000

12/31

8,500

Income Summary
12/31
12/31

18,500
15,000

12/31

33,500

Net income for the period is


925
D. Dec. 31 Income Summary
925
Revenues
925

122. Use the following worksheet to answer the following questions.

Account Title
Cash
Accounts Receivable
Supplies
Equipment
Accumulated Depr-Equip
Accounts Payable
Wages Payable
C. Finley, Capital
C. Finley, Drawing
Fees Earned
Wages Expense
Rent Expense
Depreciation Expense
Totals
Net Income (Loss)

Finley Company
Worksheet
For the Year
Ended December
31, 2014


Credit

18,000
25,000
6,000
33,000
3,000
155,000
63,000
27,000
15,000
105,000
50,000
155,000

The journal entry to close revenues would be:

A. debit Income Summary $155,000, credit Fees Earned $155,000
B. debit C. Finley, Capital $155,000, credit Fees Earned $155,000
C. debit Fees Earned $155,000; credit Income Summary $155,000
D. credit Fees Earned $155,000; credit C. Finley, Capital $155,000

155,000

132,000

155,000

132,000

Adjusted Trial Income Statement
Balance
Debit
Credit
48,000
18,000
6,000
57,000
18,000
25,000
6,000
33,000
3,000
155,000
63,000
27,000
15,000
237,000
237,000

Balance Sheet
Debit

Credit

Debit
48,000
18,000
6,000
57,000

63,000
Rent Expense
27,000
Depreciation Expense 15,000
C. Finley, Drawing
105,000
D. Income Summary
105,000
Wages Expense
63,000
Rent Expense
27,000
Depreciation Expense 15,000
124. Use the following worksheet to answer the following questions.

Finley Company
Worksheet
For the Year
Ended December
31, 2014
Adjusted Trial Income Statement Balance Sheet
Balance

155,000

132,000

155,000

132,000


Debit

Credit

Debit
48,000
18,000
6,000
57,000

18,000
25,000
6,000
33,000

18,000
25,000
6,000
33,000

3,000

3,000
155,000

63,000
27,000
15,000
237,000

50,000
132,000

Based on the preceding trial balance, the entry to close income summary would be:

A. debit C. Finley, Capital $50,000; credit Income Summary $50,000
B. debit Income Summary $155,000; credit C. Finley, Capital $155,000
C. debit Income Summary $50,000, credit C. Finley, Capital $50,000
D. debit C. Finley, Capital $9,000; credit Income Summary $9,000
125. Use the following worksheet to answer the following questions.

Account Title
Cash
Accounts Receivable
Supplies
Equipment
Accumulated Depr-Equip
Accounts Payable
Wages Payable
C. Finley, Capital
C. Finley, Drawing
Fees Earned
Wages Expense
Rent Expense
Depreciation Expense
Totals
Net Income (Loss)

Finley Company
Worksheet

6,000
33,000
3,000
155,000
63,000
27,000
15,000
105,000
50,000
155,000

155,000

132,000

155,000

132,000

82,000
50,000
132,000


Based on the preceding trial balance, the entry to close C. Finley, Drawing would be:

A. debit C. Finley, Capital $3,000, credit C. Finley, Drawing $3,000
B. debit C. Finley, Capital $12,000, credit C. Finley, Drawing $12,000
C. debit C. Finley, Drawing $3,000; credit C. Finley, Capital $3,000
D. debit C. Finley, Drawing $12,000; credit C. Finley, Capital $12,000

6,000
57,000
18,000
25,000
6,000
33,000
3,000
155,000
63,000
27,000
15,000
237,000
237,000

Balance Sheet
Debit

Debit
48,000
18,000
6,000
57,000

Credit

18,000
25,000
6,000
33,000
3,000

127. The proper sequence of steps in the accounting cycle is as follows
A. analyze and record transactions, post transaction to the ledger, prepare a trial balance, prepare financial
statements, journalize closing entries, analyze adjustment data and prepare adjusting entries
B. prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements,
journalize closing entries and post to the ledger, analyze and record transactions, post transactions to the ledger
C. analyze and record transactions, post transactions to the ledger, prepare a trial balance, analyze adjustment
data, prepare adjusting entries, prepare financial statements, journalize closing entries and post to the ledger,
and finally prepare a post-closing trial balance
D. prepare financial statements, journalize closing entries and post to the ledger, analyze and record
transactions, post transactions to the ledger, prepare a trial balance, analyze adjustment data, prepare adjusting
entries

128. The following are steps to the accounting cycle. Of the following, which step should be done first?
A. Closing entries are journalized and posted to the ledger.
B. Transactions are posted to the ledger.
C. Adjusting entries are journalized and posted to the ledger.
D. Financial statements are prepared.

129. The following are steps in the accounting cycle. Of the following, which would be prepared last?
A. An adjusted trial balance is prepared.
B. Transactions are posted to the ledger.
C. An unadjusted trial balance is prepared.
D. Adjusting entries are journalized and posted to the ledger.

130. The accounting cycle requires three trial balances be done. In what order should they be prepared?
A. Post-closing, unadjusted, adjusted
B. Unadjusted, post-closing, adjusted
C. Unadjusted, adjusted, post-closing
D. Post-closing, adjusted, unadjusted



136. A work sheet includes columns for
A. adjusting entries
B. closing entries
C. reversing entries
D. adjusting and closing entries

137. When a work sheet is complete, the adjustment columns should have
A. total credits greater than total debits if a net income was earned
B. total debits greater than total credits if a net loss was incurred
C. total debits greater than total credits if a net income was earned
D. total debits equal total credits