{"id":189107,"date":"2025-02-08T18:51:18","date_gmt":"2025-02-08T18:51:18","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=189107"},"modified":"2025-02-08T18:51:20","modified_gmt":"2025-02-08T18:51:20","slug":"completing-the-accounting-cycle","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/02\/08\/completing-the-accounting-cycle\/","title":{"rendered":"Completing the Accounting Cycle"},"content":{"rendered":"\n<p>Completing the Accounting Cycle<\/p>\n\n\n\n<p>Instructions: Encircle the corresponding number if the statement is TRUE and mark X to the number which contains FALSE statement.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>If the post-closing trial balance does not balance, then the error(s) definitely occurred at some point during the closing process.<\/li>\n\n\n\n<li>All nominal accounts must be closed before the Income Summary account can be closed.<\/li>\n\n\n\n<li>The post-closing trial balance will have fewer accounts than the adjusted trial balance.<br>4.<br>The balances of all the accounts that appear on a balance sheet are<br>the same on the adjusted trial balance as they are on a post-closing trial balance.<\/li>\n\n\n\n<li>The post-closing trial balance will contain only real accounts.<\/li>\n\n\n\n<li>The post-closing trial balance contains asset, liability, withdrawal and capital accounts.<\/li>\n\n\n\n<li>A reversing entry is a journal entry which is the exact opposite of a related adjusting entry made at the end of the period.<\/li>\n\n\n\n<li>Post-closing trial balance tests the equality of the accounts after the adjustments and the closing entries are posted.<\/li>\n\n\n\n<li>Supplies Expense is a temporary account.<\/li>\n\n\n\n<li>During the closing process, revenues are transferred to the credit side of the Income Summary account.<\/li>\n\n\n\n<li>The income summary account is used to close the income and expense<br>accounts. 12. The balance of the owner&#8217;s capital account represents the cumulative<br>net result of income, expense and withdrawal transactions. 13. Closing entries clear income and expense accounts at the end of the<br>period. 14. In the accounting cycle, information from source documents is initially recorded in the journal.<\/li>\n\n\n\n<li>Nominal account balances are reduced to zero by closing entries.<\/li>\n\n\n\n<li>The only accounts that are closed are income statement accounts.<\/li>\n\n\n\n<li>Closing entries result in the transfer of profit or loss into the owner&#8217;s Capital account.<\/li>\n\n\n\n<li>After all closing entries have been entered and posted, the balance of the Income Summary account will be zero.<\/li>\n\n\n\n<li>Depreciation Expense-Building is a temporary account.<\/li>\n\n\n\n<li>Withdrawals is a temporary account.<\/li>\n<\/ol>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p>Here is the corrected answer with explanations:<\/p>\n\n\n\n<p><strong>TRUE (\u2714) or FALSE (X):<\/strong><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> If the post-closing trial balance does not balance, then the error(s) definitely occurred at some point during the closing process.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A balancing post-closing trial balance ensures that all the accounting entries have been correctly completed, including the closing process. If it doesn&#8217;t balance, an error has occurred in posting or the trial balance process.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> All nominal accounts must be closed before the Income Summary account can be closed.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Nominal accounts (revenues and expenses) must be closed to the Income Summary account to determine the net income or loss for the period before transferring it to the Capital account.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> The post-closing trial balance will have fewer accounts than the adjusted trial balance.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The adjusted trial balance includes both real (permanent) and nominal (temporary) accounts, while the post-closing trial balance only includes real accounts since all nominal accounts are closed.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> The balances of all the accounts that appear on a balance sheet are the same on the adjusted trial balance as they are on a post-closing trial balance.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>After closing, real accounts (assets, liabilities, and owner&#8217;s equity) appear in both adjusted and post-closing trial balances, showing the same balances.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> The post-closing trial balance will contain only real accounts.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The post-closing trial balance contains only real (permanent) accounts, as temporary accounts (like revenues and expenses) are closed.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>X<\/strong> The post-closing trial balance contains asset, liability, withdrawal, and capital accounts.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>This statement is incorrect because withdrawals are not real accounts; they are temporary (nominal) accounts, which are closed during the closing process.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> A reversing entry is a journal entry which is the exact opposite of a related adjusting entry made at the end of the period.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Reversing entries undo certain adjusting entries for the next period, ensuring the accounting cycle starts fresh.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> Post-closing trial balance tests the equality of the accounts after the adjustments and the closing entries are posted.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The post-closing trial balance ensures that the debits and credits remain in balance after all closing and adjustment entries.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> Supplies Expense is a temporary account.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Supplies Expense is a temporary account that is closed at the end of the period as part of the closing entries.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> During the closing process, revenues are transferred to the credit side of the Income Summary account.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Revenues are closed into the Income Summary account on the credit side during the closing process.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> The income summary account is used to close the income and expense accounts.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Income Summary account helps close the income and expense accounts to determine net income or loss.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> The balance of the owner&#8217;s capital account represents the cumulative net result of income, expense, and withdrawal transactions.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The owner\u2019s capital account reflects all the income, expenses, and withdrawals made over time.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> Closing entries clear income and expense accounts at the end of the period.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Closing entries reset income and expense accounts to zero to prepare for the next period.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> In the accounting cycle, information from source documents is initially recorded in the journal.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Source documents are first recorded in the journal, where transactions are initially documented.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> Nominal account balances are reduced to zero by closing entries.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Closing entries bring nominal account balances to zero, preparing them for the next period.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>X<\/strong> The only accounts that are closed are income statement accounts.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>This is incorrect because in the closing process, the owner\u2019s withdrawal accounts are also closed, not just income statement accounts.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> Closing entries result in the transfer of profit or loss into the owner&#8217;s Capital account.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Profit or loss from the Income Summary account is transferred to the owner\u2019s Capital account during the closing process.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> After all closing entries have been entered and posted, the balance of the Income Summary account will be zero.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>After all closing entries, the Income Summary account will have a zero balance since all income and expenses have been closed out.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>\u2714<\/strong> Depreciation Expense-Building is a temporary account.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Depreciation Expense-Building is a temporary account and is closed at the end of the period.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>X<\/strong> Withdrawals is a temporary account.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Withdrawals (drawings) are treated as a reduction of the owner\u2019s equity, but it is a nominal account, not a permanent one, and it is closed during the period-end process.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>The accounting cycle involves multiple stages, including recording transactions in the journal, posting to the ledger, making adjustments, closing entries, and preparing the post-closing trial balance.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Nominal (temporary) accounts<\/strong> are used to track revenues, expenses, and withdrawals over a single accounting period. These accounts are closed at the end of the period to prepare for the next period.<\/li>\n\n\n\n<li><strong>Real (permanent) accounts<\/strong> represent assets, liabilities, and the owner\u2019s equity, which are carried forward to the next period without being closed.<\/li>\n\n\n\n<li>The <strong>post-closing trial balance<\/strong> ensures that after closing entries, the books remain balanced with only real accounts.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Completing the Accounting Cycle Instructions: Encircle the corresponding number if the statement is TRUE and mark X to the number which contains FALSE statement. The Correct Answer and Explanation is : Here is the corrected answer with explanations: TRUE (\u2714) or FALSE (X): Explanation: The accounting cycle involves multiple stages, including recording transactions in the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-189107","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/189107","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=189107"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/189107\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=189107"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=189107"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=189107"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}