Question

ASSIGNMENT MATERIAL QUESTIONS 1. Identify the steps in the accounting cycle, distinguish- 13. Why are assets classified as current or long terrm ing those that occur during the period from those that are performed at the end of the period what basis are they classified? Where do the classified amounts appear? current 2. Why is the worksheet a valuable accounting tool? 3. Name two advantages the worksheet has over the 14. Indicate which of the following accounts are assets and which are long-term assets: Prepaid Rent, Building, Furniture, Accounts Receivable, Cash, Note Receivable (due within one year), Note Receivable (due after one year) adjusted trial balance. 4. Why must the adjusting entries be journalized and posted if they have already been entered on the worksheet? 15. In what order are assets and liabilities listed on the bal 16. Name an outside party that is interested in whether a 17. A friend tells you that the difference between a cur- ance sheet? 5. Why should the adjusting entries be journalized and posted before the closing entries are made? liability is current or long term. Why would this party be interested in this information? 6. Which types of accounts are closed? 7. What purpose is served by closing the accounts? 8. State how the worksheet helps with recording the clos- rent liability and a long-term liability is that they are payable to different types of creditors. Is your friend correct? Include in your answer the definitions of these two categories of liabilities ing entries 9.) Distinguish between permanent accounts and tempo- rary accounts, indicating which type is closed at the end of the period. Give five examples of each type of account. 18. Show how to compute the current ratio and the debt ratio. Indicate what ability each ratio measures, and state whether a high value or a low value is safer for each 10. Is Income Summary a permanent account or a tempo- 11. Is net income a 12. Give the closing entries for the following accounts rary account? When and how is it used? permanent account, a temporary 19. Capp Company purchased supplies of $120 on account. account, or something else? Explain. The accountant debited Inventory and credited Accounts Payable for $120. A week later, after this entry has been posted to the ledger, the accountant discovers the error Describe two ways the accountant can correct the error (balances in parentheses): Service Revenue ($5,000), Salary Expense ($1,200), Income Summary (credit bal- ance of $2,000), Withdrawals ($2,500) 20. Why are reversing entries used? This Question covers Chapter 4 Appendix topics. 208 Part 1 The Basic Structure of Accounting

Answer 1

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No.	Steps	Explanation	Occurred
1	Analysis and recording of transaction	When transaction happens, then first step to analysis transaction.	Occurred during period
2	Journal	Every transaction should be recorded in proper Journal chronologically.	Occurred during period
3	Posting to Ledger	All journal entries should be posted into ledger account for classified manner.	Occurred during period
4	Trial balance	Preparation of trial balance After considering closing balance of ledger account at end of accounting period.	Occurred at end of period
5	Adjustment entries	All adjustment should properly record and adjusted with relevant account.	Occurred at end of period
6	Adjusted Trial balance	After recording of adjustment entry, prepare adjusted trial balance for preparation of closing entries.	Occurred at end of period
7	Closing entries	All temporary account close to income summary account and close income summary account to retained earnings.	Occurred at end of period
8	Financial statement	After recording of closing entries company prepare financial statement.	Occurred at end of period