CPB / BookKeeping Bookkeeping Cycle 2

Question 1

Which step in the bookkeeping cycle immediately follows posting journal entries to the ledger?

Accepted Answer

Preparing the trial balance

Answer

Adjusting entries

Answer

Closing entries

Answer

Preparing financial statements

Question 2

A company pays $12,000 for a one-year insurance policy on July 1. What is the adjusting entry on December 31?

Accepted Answer

Debit Insurance Expense $6,000; Credit Prepaid Insurance $6,000

Answer

Debit Prepaid Insurance $6,000; Credit Insurance Expense $6,000

Answer

Debit Insurance Expense $12,000; Credit Cash $12,000

Answer

Debit Prepaid Insurance $12,000; Credit Cash $12,000

Question 3

Which accounts are closed at the end of the accounting period?

Accepted Answer

Revenue, expenses, and dividends

Answer

Assets, liabilities, and equity

Answer

Cash, accounts receivable, and inventory

Answer

Prepaid expenses and accrued liabilities

Question 4

What does a post-closing trial balance verify?

Accepted Answer

Only permanent accounts remain open with equal debits and credits

Answer

All revenue and expense accounts have zero balances before closing

Answer

The adjusted trial balance was prepared correctly

Answer

All transactions were journalized in the current period

Question 5

Accrued salaries of $3,000 are unpaid at period end. Which adjusting entry is correct?

Accepted Answer

Debit Salaries Expense $3,000; Credit Salaries Payable $3,000

Answer

Debit Salaries Payable $3,000; Credit Salaries Expense $3,000

Answer

Debit Cash $3,000; Credit Salaries Expense $3,000

Answer

Debit Salaries Expense $3,000; Credit Prepaid Salaries $3,000

Question 6

In which order are financial statements typically prepared?

Accepted Answer

Income statement, statement of retained earnings, balance sheet

Answer

Balance sheet, income statement, statement of cash flows

Answer

Statement of retained earnings, balance sheet, income statement

Answer

Balance sheet, statement of retained earnings, income statement

Question 7

What is the purpose of reversing entries in the bookkeeping cycle?

Accepted Answer

To simplify recording of cash transactions in the next period related to prior-period accruals

Answer

To correct errors made in the previous accounting period

Answer

To close revenue and expense accounts to retained earnings

Answer

To transfer balances from temporary to permanent accounts