Chapter 16 Objective Questions
True/False
Indicate whether the statement is true or false.
____
1. General ledger account balances are changed only by posting journal entries.
____
2. Information needed for journalizing adjusting entries is taken from Income Statement and Balance Sheet
columns of a work sheet.
____
3. Information needed for journalizing closing entries is taken from the Adjustment columns of a work sheet.
____
4. Indicating a source document is not necessary when journalizing adjusting entries.
____
5. At the end of a fiscal period, the temporary accounts are closed to prepare the general ledger for the next
fiscal period.
____
6. Income Summary is a temporary account and is used only at the beginning of a fiscal period.
____
7. Income Summary has a debit balance.
____
8. Amounts needed for the closing entries are obtained from the Trial Balance columns of a work sheet.
____
9. The income summary account is a temporary account and must begin each fiscal period with a zero balance.
____ 10. Adjusting entries bring subsidiary ledger accounts up to date.
____ 11. Adjusting entries recorded in a work sheet are journalized in a general journal.
____ 12. Adjusting entries are recorded on the next line following the last daily transaction.
____ 13. Closing temporary accounts at the end of a fiscal period is an application of the Matching Expenses with
Revenue accounting concept.
____ 14. To close a temporary account, an amount equal to its balance is recorded on the side opposite the balance.
____ 15. Permanent accounts are sometimes referred to as nominal accounts.
____ 16. The ending account balances of permanent accounts for one fiscal period are the beginning account balances
for the next fiscal period.
____ 17. Contra accounts with credit balances are closed by crediting the accounts and debiting Income Summary.
____ 18. Expense accounts are closed by crediting the expense accounts and debiting Income Summary for the total
amount.
____ 19. The income summary account is closed into the retained earnings account.
____ 20. Dividends increase the earnings retained by a corporation.
____ 21. After the closing entry for the dividends account is posted, Dividends has a zero balance.
____ 22. After all closing entries are posted, the income statement accounts are the only general ledger accounts that
have balances.
____ 23. Income statement accounts with zero balances to begin the new fiscal year is an application of the Business
Entity accounting concept.
____ 24. The purpose of the post-closing trial balance is to prove the general ledger equality of debits and credits.
____ 25. The first steps in the accounting cycle for a merchandising business are to check source documents for
accuracy and analyze transactions into debit and credit parts.
____ 26. The final step in the accounting cycle for a merchandising business is to prepare financial statements from the
work sheet.
____ 27. Permanent accounts include the asset and liability accounts as well as the owners' capital accounts.
____ 28. The income summary account is unique because it does not have a normal balance side.
____ 29. Service and merchandising businesses use totally different accounting cycles.
____ 30. Income Summary is used only at the end of the fiscal period to help prepare other accounts for a new fiscal
period.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 31. The two types of journal entries needed to change general ledger account balances at the end of the fiscal
period are ____.
a. adjusting and correcting entries
c. adjusting and closing entries
b. closing and correcting entries
d. none of the above
____ 32. Information needed for journalizing adjusting entries is taken from the ____.
a. Trial Balance columns of a work sheet
b. Adjustments columns of a work sheet
c. Income Statement columns of a work sheet
d. Balance Sheet columns of a work sheet
____ 33. Recording closing entries to prepare temporary accounts for the next fiscal period is an application of the
accounting concept ____.
a. Matching Expenses with Revenue
c. Accounting Period Cycle
b. Adequate Disclosure
d. Consistent Reporting
____ 34. The store supplies inventory adjustment includes a debit to Supplies Expense--Store and a credit to ____.
a. Income Summary
c. Purchases
b. Merchandise Inventory
d. Supplies--Store
____ 35. The amounts needed for closing entries are obtained from the work sheet's ____.
a. Trial Balance and Balance Sheet columns
b. Adjustments and Balance Sheet columns
c. Income Statement and Balance Sheet columns
d. Balance Sheet columns
____ 36. Each revenue account must begin each fiscal period with a ____.
a. debit balance
b. credit balance
c. zero balance
d. balance reflecting net income from the previous period
____ 37. To close the revenue account, the revenue account balance for the fiscal period is transferred into ____.
a. the income summary account
c. the cash account
b. the capital accounts
d. none of the above
____ 38. Having each cost and expense account begin a new fiscal period with a zero balance is an application of the
accounting concept ____.
a. Accounting Period Cycle
c. Matching Expenses with Revenue
b. Adequate Disclosure
d. Consistent Reporting
____ 39. To close the sales account, ____.
a. debit Sales; credit Cash
c. debit Income Summary; credit Sales
b. debit Sales; credit Income Summary
d. debit Cash; credit Sales
____ 40. To close the expense and cost accounts, ____.
a. debit the expense and cost accounts; credit Income Summary
b. debit the expense accounts; credit the capital accounts
c. debit Income Summary; credit the expense and cost accounts
d. debit Income Summary; credit the capital accounts
____ 41. To close the income summary account when there is net income, ____.
a. debit Cash; credit Income Summary
b. debit the capital accounts; credit Income Summary
c. debit Income Summary; credit Retained Earnings
d. debit Retained Earnings; credit Income Summary
____ 42. To close the dividends account, ____.
a. debit Retained Earnings and credit Dividends
b. debit Dividends and credit Retained Earnings
c. debit Income Summary and credit Dividends
d. debit Dividends and credit Income Summary
____ 43. Which journal entries change general ledger account balances at the end of a fiscal period?
a. Adjusting entries
c. Both A and B
b. Closing entries
d. Neither A nor B
____ 44. Temporary accounts include ____.
a. revenue accounts
c. expense accounts
b. cost accounts
d. all of the above
____ 45. Which income statement accounts have zero balances to begin a new fiscal period?
a. Revenue accounts
c. Expense accounts
b. Cost accounts
d. All of the above
____ 46. Which balance sheet accounts have up-to-date balances to begin a new fiscal period?
a. Asset accounts
c. Capital accounts
b. Liability accounts
d. All of the above
____ 47. Merchandising businesses use an accounting cycle similar to the accounting cycle of ____.
a. Service businesses
c. Proprietorships
b. Corporations
d. All of the above
____ 48. To reduce the debit balances of income statement accounts to zero, ____.
a. debit the income statement accounts and credit Income Summary
b. debit Income Summary and credit the income statement accounts
c. debit the income statement accounts and credit Retained Earnings
d. debit Retained Earnings and credit the income statement accounts
____ 49. Which of the following is not a closing entry for a corporation?
a. Closing entry for adjustments
b. Closing entry for income statement accounts
c. Closing entry for the dividends account
d. Closing entry to record net income or net loss in the retained earnings account
____ 50. After adjusting and closing entries have been posted to the general ledger, a ____.
a. balance sheet is prepared
c. post-closing balance sheet is prepared
b. trial balance is prepared
d. post-closing trial balance is prepared
Chapter 16 Objective Questions
Answer Section
TRUE/FALSE
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T
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MULTIPLE CHOICE
31.
32.
33.
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35.
36.
37.
38.
ANS:
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C
B
A
D
C
C
A
C
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B
C
C
A
C
D
D
D
D
B
A
D
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1