Question 1 The account that is used solely to determine the net effect of revenues and expenses and to transfer the resulting income or loss into equity is
A Retained earnings.
B Income statement.
C Income summary.
D Operating income.
Question 2 In order to close a revenue account with a normal balance,
A The balance must be reduced to zero with a debit.
B The balance must be reduced to zero with a credit.
C Expenses must be netted against the revenue accounts.
D The income summary must be debited.
Question 3 The journal entry to close a $3,000 loss in the income summary account would be
A Net loss 3,000
Income summary 3,000
B Income summary 3,000
Expenses 3,000
C Income summary 3,000
Retained Earnings-equity 3,000
D Retained Earnings-equity 3,000
Income summary 3,000
Question 4 Which of the following accounts is not closed to the income summary account?
A Salary expense.
B Accounts payable.
C Rent revenue.
D Cost of goods sold.
Question 5 A post-closing trial balance is performed to
A Determine if debits equal credits after the closing entries have been made.
B Detect recording and transcription errors after reversing entries are made.
C Check for clerical mistakes before the closing entries are made.
D Help prevent recording, posting, and other bookkeeping errors.
Question 6 The purpose of reversing entries is to
A Correct mistakes from previous journal entries.
B Account for transactions left out in the previous period.
C Make the recording of regular transactions easier.
D Change the financial statements from prior periods.
Question 7 All of the account balances that are closed to equity are reported on the
A Balance sheet.
B Statement of cash flows.
C Income statement.
D Statement of retained earnings.
Question 8 Which of the following accounts is closed at the end of the accounting period?
A Depreciation expense.
B Accumulated depreciation.
C Accounts payable.
D Prepaid expense.
Question 9 Which of the following journal entries may be reversed with a reversing entry?
A An adjusting entry for depreciation of a piece of equipment.
B A cost of goods sold adjustment to inventory.
C A closing entry that brought a revenue account to zero.
D An adjusting entry for a prepaid item that was expensed in the original transaction.
Question 10 Which of the following is NOT a result of the closing process?
A The income statement can be prepared to report on an entity's performance during a specified period.
B The entity's net income or loss is transferred to equity.
C All income statement accounts will begin each accounting period at zero.
D Regular transactions are not affected by accruals.