Podcast
Questions and Answers
All of the following accounts are temporary except:
All of the following accounts are temporary except:
The purpose of the closing process is to:
The purpose of the closing process is to:
What does an unclassified balance sheet do?
What does an unclassified balance sheet do?
Broadly groups assets, liabilities, and equity
What is the total current assets that would be reported on a classified balance sheet prepared for the company?
What is the total current assets that would be reported on a classified balance sheet prepared for the company?
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Place the steps in the four-step closing process in the correct order: Step 1: Close the revenue accounts; Step 2: Close the expense accounts; Step 3: Close the income summary account; Step 4: Close the withdrawals account.
Place the steps in the four-step closing process in the correct order: Step 1: Close the revenue accounts; Step 2: Close the expense accounts; Step 3: Close the income summary account; Step 4: Close the withdrawals account.
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Match the following accounts with their categories: Buildings, Short-term investments, Accounts payable, Trademarks, Wages payable, Land held for future expansion, Franchises, Accounts receivable.
Match the following accounts with their categories: Buildings, Short-term investments, Accounts payable, Trademarks, Wages payable, Land held for future expansion, Franchises, Accounts receivable.
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List the steps of the accounting cycle in their proper order.
List the steps of the accounting cycle in their proper order.
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Identify which of the following accounts would be included in a post-closing trial balance.
Identify which of the following accounts would be included in a post-closing trial balance.
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Identify which of the following accounts would be included in a post-closing trial balance.
Identify which of the following accounts would be included in a post-closing trial balance.
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Study Notes
Temporary vs. Permanent Accounts
- Temporary accounts include revenues, expenses, and withdrawals and are reset each period.
- Permanent accounts include assets, liabilities, and owner’s capital; they carry balances across periods.
Closing Process
- The closing process summarizes a period's revenues and expenses.
- Key purpose is to reset temporary accounts (revenues, expenses) to zero for the next accounting period.
Unclassified Balance Sheet
- Unclassified balance sheets broadly group assets, liabilities, and equity without detailed subcategories.
- GAAP does not allow unclassified balance sheets for formal reporting purposes.
Total Current Assets Calculation
- Total current assets are calculated from cash, merchandise inventory, notes receivable (due in 30 days), prepaid insurance, short-term investments, and supplies.
- Total current assets for the example provided amount to $30,750.
Four-Step Closing Process Order
- Close revenue accounts first, then expense accounts, followed by the income summary account, and finally the withdrawals account.
- Correct ordering of these steps is crucial for accurate financial reporting.
Types of Assets and Liabilities
- Plant assets include buildings, while current assets cover short-term investments and accounts receivable.
- Intangible assets include trademarks and franchises, while current liabilities comprise accounts payable and wages payable.
Account Balances Structure
- The account balance structure includes debit and credit totals to ensure the accounting equation holds (total debits = total credits).
- Essential components include cash, prepaid insurance, notes receivable, buildings, and expenses.
Accounting Cycle Steps
- The accounting cycle involves several critical steps:
- Analyzing and journalizing transactions, posting entries, preparing trial balances, and adjusting entries.
- Final steps include creating financial statements and post-closing trial balances after closing entries are made.
Post-Closing Trial Balance Contents
- Included in a post-closing trial balance are permanent accounts like equipment, accounts receivable, owner capital, and prepaid service fees.
- Temporary accounts like expenses and revenues are not included in the post-closing trial balance.
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Description
Test your knowledge of accounting principles with these flashcards. Each card presents you with definitions and multiple-choice questions that will challenge your understanding of temporary and permanent accounts. Perfect for students studying accounting concepts.
