Question

QUESTION 6 Financial Statements should be prepared After daily transactions have been recorded, but before adjusting entries are posted. After closing entries are posted, but before deferral entries are journalized. After adjusting entries are posted, but before the post-closing trial balance is prepared. After all trial balances are prepared and closing entries are finalized. QUESTION 7 Following the Closing Journal Entries which of the following accounts must have zero balances? Allowance for Doubtful Accounts Salary and Wages Payable Accumulated Depreciation None of the above must have zero balances

Answer 1

Question 6:

The correct answer is "After all trial balances are prepared and closing entries are finalized".

Supporting explanations:

Financial Statements like Income Statement, Statement of Retained Earnings, Statement of Stockholders' Equity, Statement of Cash Flows and Balance Sheet are prepared after preparing the unadjusted trial balance, adjusting entries and adjusted trial balance and finally preparing the closing entries with closing trial balance. All these trial balances with closing entries are required to prepare to know the ending balances of all permanent accounts like assets, liabilities and stockholders' equity to present them and to close all the temporary accounts like revenue, expenses and net income in each financial year.

Therefore, the correct option is "After all trial balances are prepared and closing entries are finalized".

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Question 7:

The correct answer is "None of the above must have zero balances".

Supporting explanations:

When closing entries are prepared, only the temporary accounts like all revenues accounts (sales revenue, service revenue, fees earned etc.) and all expenses accounts (salaries and wages expenses, rent expense, supplies expense etc.) must be closed so their respective account balances will have zero balances but the temporary accounts like all asset account accounts including contra asset accounts, liabilities accounts etc. will not be closed and their respective account balances are transferred to next financial years so their balances can not be zero. Allowance for doubtful accounts and Accumulated depreciation accounts are contra asset accounts and salaries & wages payable is a liability account so their balances are not closed but transferred to next financial year so their balances can not be zero.

Hence, the correct answer is "None of the above must have zero balances".