Accounting Ch. 6 Study Guide

Accounting Ch. 6 Study Guide

Changes in owner’s equity that result from investments or withdrawals of assets by the owner are included in the
Statement of Owner’s Equity
Owner’s equity can be increased through
Investments by owner
The balance in an expense account is closed to a(n)
Income Summary Account
The order in which financial statements should be prepared is
Income Statement, Statement of Owner’s Equity, and Balance Sheet
After the closing entries are journalized and posted, which accounts would NOT have a balance
Temporary accounts
A form of balance sheet that lists the liabilities and the owner’s equity sections below the assets section is called
Report Form
After the accounts are closed and the journal entries have been posted, which of the following accounts would have a balance
Permanent accounts (assets, liabilities, & owners capital)
The amount reported in the Balance Sheet columns of the work sheet for the owner’s capital represents the
The beginning balance plus additional investments
When recording closing entries in the general journal, what is written in the Description column
Closing Entries
To prove the equality of the debit and credit balances in the general ledger accounts after the closing entries have been journalized and posted, prepare the
Post-Closing Trial Balance
The journal entry to close the income summary account (showing a net loss) includes
Debiting the owner’s capital account and crediting Income Summary
The journal entry to close expense accounts includes
Debiting Income Summary and crediting the expense account
The journal entry to close revenue accounts includes
Debiting the revenue accounts and crediting income summary
Which step is taken at the end of the accounting period
Prepare a post-closing trial balance.
Know the steps of the accounting cycle in the correct order
1. Analyze source documents.
2. Journalize the transactions.
3. Post to the general ledger.
4. Prepare trial balance.
5. Determine & prepare the needed adjustments on the work sheet.
6. Complete end of period work sheet.
7. Journalize and post the adjusting entries.
8. Prepare income statement, statement of owner’s equity, and a balance sheet.
9. Journalize and post the closing entries.
10. Prepare a post-closing trial balance.
The journal entry to close the income summary account (showing a profit) includes
Debiting Income Summary and crediting the owner’s capital account
What is the correct sequence for closing the temporary accounts
Revenue accounts, expense accounts, Income Summary, and drawing account
The steps involved in handling all of the transactions and events completed during an accounting period, beginning with placing data in a book of original entry and ending with a post-closing trial balance, are referred to collectively as
The accounting cycle
The Income Summary account is used to
Close revenue accounts and expense accounts and update the owner’s capital account
The journal entry to close the drawing account includes
Debit the capital account and credit the drawing account.
What is the purpose of the post-closing trial balance
To prove the equality of the debit and credit balances in the general ledger accounts.
Cash and other assets that will be converted into cash within one year or the normal operating cycle of the business, whichever is longer, are called
Current assets
The account to which revenue and expenses are closed is called
Income Summary
The account to which the drawing account is closed is called
Owner’s Capital
A balance sheet that groups similar items is called a(n)
Classified balance sheet
The body of the income statement consists of an itemized list of
Revenues and expenses
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