Accounting Journal and Accounting Cycle

What is the purpose of a trial balance?

• To calculate the net income of a company

• To determine the market value of assets

• To ensure that the total debits equal the total credits

• To track the inventory levels of a business

How do you calculate the balance of an account in a ledger?

• Ignore the credits and only consider the debits for that account.

• Subtract all the credits and add all the debits for that account.

• Add up all the credits and subtract all the debits for that account.

• Multiply all the credits and divide by the debits for that account.

What are the types of adjusting entries?

• Accrued income, accrued liabilities, deferred income, and deferred liabilities

• Accrued revenues, accrued expenses, deferred revenues, and deferred expenses

• Prepaid revenues, prepaid expenses, unearned revenues, and unearned expenses

• Fixed revenues, fixed expenses, advanced revenues, and advanced expenses

2. Johnny had receivables of $5 500 at the start of 2010. During the year to 31 Dec 2010 he makes credit sales of $55 000 and receives cash of $46 500 from credit customers. What is the balance on the accounts receivables at 31 Dec 2010?

• A. $8 500 Dr

• B. $8 500 Cr

• C. $14 000 Dr

• D. $14 000 Cr

Which of the following are reported in the stockholders' equity section of the balance sheet? ( )

• a. revenues and expenses

• b. dividends and retained earnings

• C. common stock and dividends

• d. common stock and retained earnings

Which statement regarding the liabilities and owners’ equity section of balance sheet is False?

• a. Payment of Dividend Payable eliminates both the assets and the owners' equity

• b. Liabilities are debts or obligations that must be discharged in money or services in the future

• c. Owners' equity is a residual claim to the remaining assets after discharge of debts.

• d. Balance sheet of corporations should separate Capital Stock and Retained Earnings.

Financial statements can be prepared from

• a. the trial balance

• b. the adjusted trial balance

• C. the journal

• d. the ledger

Which of the following statements about a trail balance is incorrect?( )

• a. It's primary purpose is to prove the mathematical equality of debits and credits

  after posting

• b. It uncovers certain errors in the journalizing and posting

• c. It is useful in the preparation of financial statements

• d. It proves that all transactions have been recorded.

In the closing process all of the revenues and expenses account balances are

transferred to the ( )

• a. capital account

• b. income summary account

• c. retained earnings account

• d. dividends account

The post-closing trial balance consists only of ( )

• a. Asset and liability accounts

• b. temporary accounts

• c. revenue and expense accounts

• d. permanent accounts