Accounting Century 21 Chapter 6

What is the purpose of accounting?

• To record, analyze, and report financial transactions and information.

• To hide financial information from stakeholders.

• To create fictional financial statements.

• To make financial transactions more complicated than necessary.

What is the accounting equation?

• Assets = Liabilities + Equity

• Assets - Liabilities = Equity

• Assets + Liabilities = Equity

• Assets = Liabilities - Equity

What is the purpose of a trial balance?

• To ensure that the total debits equal the total credits in the accounting records.

• To reconcile the bank statements with the accounting records.

• To determine the cash flow of a company.

• To calculate the net income of a company.

What is the difference between cash basis and accrual basis accounting?

• Cash basis accounting records transactions when cash is paid, while accrual basis accounting records transactions when cash is received.

• Cash basis accounting records transactions when they occur, regardless of when cash is received or paid, while accrual basis accounting records transactions when cash is received or paid.

• Cash basis accounting records transactions when cash is received or paid, while accrual basis accounting records transactions when they occur, regardless of when cash is received or paid.

• Cash basis accounting records transactions when they occur, regardless of when cash is received or paid, while accrual basis accounting records transactions when cash is paid.

What is the purpose of adjusting entries?

• The purpose of adjusting entries is to ensure the accuracy of financial statements.

• The purpose of adjusting entries is to delay the preparation of financial statements.

• The purpose of adjusting entries is to hide errors in financial statements.

• The purpose of adjusting entries is to manipulate financial statements.

What is the difference between prepaid expenses and accrued expenses?

• Prepaid expenses are paid in advance, while accrued expenses are incurred but not yet paid.

• Prepaid expenses are expenses that are paid in advance, while accrued expenses are expenses that are not yet incurred.

• Prepaid expenses are expenses that are paid after they are incurred, while accrued expenses are expenses that are paid in advance.

• Prepaid expenses are expenses that are incurred but not yet paid, while accrued expenses are expenses that are paid in advance.

What is the purpose of closing entries?

• To delete all financial transactions

• To adjust the balances of permanent accounts

• To calculate the net income for the period

• To reset temporary accounts and transfer balances to retained earnings.

What is the difference between a fiscal year and a calendar year?

• A fiscal year is not necessarily aligned with the calendar year.

• A fiscal year starts on January 1st.

• A fiscal year is shorter than a calendar year.

• A fiscal year is the same as a calendar year.

What is the purpose of a post-closing trial balance?

• To identify errors in the financial statements.

• To calculate the net income for the period.

• To reconcile the bank statements with the general ledger.

• To ensure all temporary accounts have been closed and debits equal credits.

What is the difference between a general journal and a general ledger?

• A general journal is a physical book, while a general ledger is a digital record.

• A general journal is a record of all financial transactions in chronological order, while a general ledger is a summary of all transactions categorized by account.

• A general journal is used for external reporting, while a general ledger is used for internal reporting.

• A general journal is a summary of all transactions categorized by account, while a general ledger is a record of all financial transactions in chronological order.