Accounting Part 2 Review

Interest income is recorded only if a note receivable is collected.

• True

• False

Preparing the general ledger for the next fiscal period is an application of the Business Entity accounting concept.

• True

• False

The closing entry for income statement accounts with debit balances closes only the expense accounts.

• True

• False

A temporary account is closed by transferring its balance out of the account.

• True

• False

The book value of accounts receivable at year end is an estimate of the amount of accounts receivable the business expects to collect during the next fiscal year.

• True

• False

The amount of dividends declared during the year is presented on the income statement.

• True

• False

The purpose of the post-closing trial balance is to prove the general ledger equality of debits and credits.

• True

• False

Increasing operating revenue while keeping cost of merchandise sold the same will increase gross profit.

• True

• False

Alpha Company’s benchmark total operating expense ratio is between 28.0% and 30.0%. A decline in its operating expense ratio from 32.1% to 30.8% is a favorable trend.

• True

• False

The column totals of an employee earnings record provide the debit and credit amounts needed to journalize a payroll.

• True

• False