Page 180 - Accounting Principles (A Business Perspective)

4. Completing the accounting cycle

Sales taxes payable Are taxes a company has collected from customers but has not remitted to the taxing
authority, usually the state.
Stockholders' equity Shows the owners' interest (equity) in the business.
Taxes withheld from employees Items such as federal income taxes, state income taxes, and social
security taxes withheld from employees' paychecks.
Unclassified balance sheet A balance sheet showing only three major categories: assets, liabilities, and
stockholders' equity.
Unearned revenues (revenues received in advance) Result when payment is received for goods or
services before revenue has been earned.
Work sheet A columnar sheet of paper on which accountants have summarized information needed to
make the adjusting and closing entries and to prepare the financial statements.
*Some of these terms have been defined in earlier chapters but are included here for your convenience.
Self-test
True-false
Indicate whether each of the following statements is true or false.
At the end of the accounting period, three trial balances are prepared.
The amounts in the Adjustments columns are always added to the amounts in the Trial Balance columns to

determine the amounts in the Adjusted Trial Balance columns.
If a net loss occurs, it appears in the Income Statement credit column and Statement of Retained Earnings debit
column.
After the closing process is complete, no balance can exist in any revenue, expense, Dividends, or Income
Summary account.
The post-closing trial balance may contain revenue and expense accounts.
All accounting systems currently in use are computerized.

Multiple-choice
Select the best answer for each of the following questions.
Which of the following accounts is least likely to be adjusted on the work sheet?
a. Supplies on Hand.
b. Land.
c. Prepaid Rent.
d. Unearned Delivery Fees.
If the Balance Sheet columns do not balance, the error is most likely to exist in the:
a. General journal.

b. General ledger.
c. Last six columns of the work sheet.
d. First six columns of the work sheet.
Net income for a period appears in all but which one of the following?
a. Income Statement debit column of the work sheet.
b. Statement of Retained Earnings credit column of the work sheet.
c. Statement of retained earnings.

d. Balance sheet.
Which of the following statements is false regarding the closing process?

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