#1
Which financial statement is prepared first during the accounting closing process?
Income Statement
ExplanationSummarizes revenue and expenses
#2
What is the purpose of the post-closing trial balance?
To verify the accuracy of the financial statements
ExplanationEnsures all accounts are in balance after closing entries
#3
What is the purpose of the income summary account in the closing process?
To calculate net income or loss
ExplanationTemporary account to close revenue and expense accounts
#4
What is the purpose of the contra account 'Accumulated Depreciation' in the closing process?
To allocate the cost of assets over their useful life
ExplanationReduces asset value to reflect depreciation
#5
What is the purpose of the contra account 'Allowance for Doubtful Accounts' in the closing process?
To estimate and record potential bad debts
ExplanationReduces accounts receivable to account for expected bad debts
#6
What is the purpose of adjusting entries in accounting?
To adjust the financial statements for accruals and deferrals
ExplanationCorrects accounts for timing differences
#7
Which type of adjusting entry is used to recognize revenue that has been earned but not yet received?
Accrued Revenue
ExplanationRecords revenue earned but not yet received
#8
Which financial statement reports the changes in retained earnings over a specific period?
Statement of Retained Earnings
ExplanationShows changes in retained earnings from net income, dividends
#9
What is the purpose of the closing process in accounting?
To prepare financial statements
ExplanationFinalizes accounts for reporting period
#10
Which financial statement reports cash transactions related to operating, investing, and financing activities?
Statement of Cash Flows
ExplanationShows cash inflows and outflows from different activities
#11
In the closing process, which account is used to transfer the net income or loss to the retained earnings account?
Income Summary
ExplanationTemporary account for closing revenue and expense accounts
#12
Which financial statement reflects the financial position of a company at a specific point in time?
Balance Sheet
ExplanationShows assets, liabilities, and equity at a moment
#13
Which type of adjusting entry is used to recognize expenses that have been incurred but not yet paid?
Accrued Expenses
ExplanationRecords expenses incurred but not yet paid
#14
In the accounting cycle, what comes after the post-closing trial balance?
Reversing Entries
ExplanationAdjusting entries to facilitate next period's accounting
#15
Which financial statement reflects the company's profitability over a specific period?
Income Statement
ExplanationReports revenue, expenses, and net income