net effect of revenues and expenses

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.

 

 

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