Question

Closing entries:

Select one:

a. reduce the number of permanent accounts.

b. are prepared before the unadjusted trial balance.

c. cause the revenue and expense accounts to have zero balances.

d. summarise the activity in every account.

An accumulated depreciation account:

Select one:

a. has a normal credit balance.

b. increases on the debit side.

c. is offset against total revenue on the income statement.

d. is a contra liability account.

In a service business, revenue is considered earned:

Select one:

a. when the service is performed.

b. at the end of the month.

c. when cash is received.

d. at the end of the year.

Indicate how a payment of cash for cleaning services affects the basic accounting equation.

Select one:

a. Increase assets, cash and decrease in equity, cleaning expenses.

b. Decrease assets, cash and increase in equity, cleaning expenses.

c. Increase assets, cash and increase in equity, cleaning expenses.

d. Decrease assets, cash and decrease in equity, cleaning expenses.

When preparing closing journal entries, the interest income account is closed:

Select one:

a. to the Profit and loss summary account.

b. to the interest income account.

c. directly to the Capital account.

d. directly to an accounts receivable account.

If services are provided for credit, then:

Select one:

a. liabilities will increase.

b. Equity will increase.

c. liabilities will decrease.

d. assets will decrease.

A T account is:

Select one:

a. a special account used instead of a journal.

b. used for accounts that have only a debit balance.

c. a way of depicting the basic form of an account.

d. a special account used instead of a trial balance.

f the totals of a trial balance are not equal, it could be due to:

Select one:

a. recording the transaction more than once.

b. a failure to record or to post a transaction.

c. recording the same erroneous amount for both the debit and credit parts of a transaction.

d. an error in calculating the account balances

Answer 1

Part 1) OPTION C----- cause the revenue and expenses account to have zero balances

Closing entries cause the revenue and expenses balance to be transferred to the Income Statement , hence reducing their balances to be zero.

Part 2)OPTION A----- has normal credit balance

Accumulated depreciation has normal credit balance . It is deducted from gross fixed assets to reveal remaining book value.

Part 3)OPTION A---- when service is performed

In service business, revenue is considered earned when service is performed.

Part 4)Option D------ Decrease Assets, cash and decrease in equity, cleaning expenses

Accounting Equation, Assets = Liabilities + Equity

Payment of cash -Decreases assets

Cleaning expenses- Reduces Net income which in turn reduces retained earnings for shareholders equity

Part 5)OPTION A----- To the Profit & Loss summary account

During closing entries, Interest income account is closed to profit &loss summary account.

Part 6)OPTION B----- Equity will increase

If services are provided for credit, then equity will increase. Since, revenue will increase which in turn increases net income and net income is transferred to retained earnings under equity section.

Part 7) OPTION C------ a way of depicting basic form of an account.

A T-account is a way of depicting basic form of an account.It is used in double entry book keeping to keep debits and credits separated.

Part 8)OPTION D---- an error in calculating account balances

If the total of trial balance are not equal , it could be due to an error in calculating account balances.