Accounting Cycle Quiz

What is the accounting cycle described as in the text?

• A process to manage employees

• A process to keep track of money

• A process to organize inventory

• A process to create budgets

What is the final step in preparing an income statement?

• List Revenue

• Subtract Expenses

• Calculate Profit

• Compare Costs

What is subtracted in the statement of owner's equity?

• Investments

• Net Income

• Withdrawals

• Beginning Equity

What is the effect of net income on the owner's equity?

• It decreases the owner's equity

• It increases the owner's equity

• It has no effect on the owner's equity

• It only affects the business's liabilities

Why is it called a balance sheet?

• Because it lists all employees

• Because everything has to balance

• Because it shows only profits

• Because it is updated daily

What are considered "assets" on a balance sheet?

• Debts and obligations

• Cash, equipment, and buildings

• Loans and unpaid bills

• Employee salaries

What should the total assets equal on a balance sheet?

• Total liabilities

• Total owner's equity

• Total liabilities plus equity

• Total revenue

What is the analogy used for verifying everything?

• Writing a new report

• Double-checking your final report

• Calculating taxes

• Preparing a budget

What is the main goal of the closing process?

• To increase revenue

• To ensure accuracy and organization

• To reduce expenses

• To calculate taxes

What does the first closing entry help with?

• Calculating interest

• Summarizing earnings or expenses

• Auditing accounts

• Creating new accounts