The Special Account

1. The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the: (Points : 2) 
Income Summary account
Closing account
Balance column account
Contra account

2. The Income Summary account is used: (Points : 2) 
To adjust and update asset and liability accounts
To close the revenue and expense accounts
To determine the appropriate dividend amount
In some situations to replace the income statement
To replace the retained earnings account in some businesses

3. The main purpose of adjusting entries is to: (Points : 2) 
Record external transactions and events
Record internal transactions and events
Recognize assets purchased during the period
Recognize debts paid during the period
Correct errors 

4. If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on the following January 5 would include: (Points : 2) 
A debit to Cash and a credit to Salaries Payable
A debit to Cash and a credit to Prepaid Salaries
A debit to Salaries Payable and a credit to Cash
A debit to Salaries Payable and a credit to Salaries Expense
No entry would be necessary on January 5

5. The accrual basis of accounting: (Points : 2) 
Is generally accepted for external reporting since it is more useful for most business decisions
Is flawed because it gives complete information about cash flows
Recognizes revenues when received in cash
Recognizes expenses when paid in cash
Eliminates the need for adjusting entries at the end of each period 

6. Which of the following accounts would not be on the post closing trial balance? (Points : 2) 
Accounts Payable
Accounts Receivable
Common Stock
Dividends
Retained Earnings

7. The primary objective of financial accounting is: (Points : 2) 
To serve the decision-making needs of internal users
To provide financial statements to help external users analyze and interpret an organization's activities
To monitor and control company activities
To provide information on both the costs and benefits of managing products and services
To know what, when and how much to produce

8. Which of the following elements are found on the income statement? (Points : 2) 
Cash
Accounts Receivable
Common Stock
Retained Earnings
Salaries Expense 

9. Distributions of assets by a business to its stockholders are called: (Points : 2) 
Dividends
Expenses
Assets
Retained earnings
Net Income

10. Net Income: (Points : 2) 
Decreases equity
Represents the amount of assets owners put into a business
Equals assets minus liabilities
Is the excess of revenues over expenses
Represents the owners' claims against assets

11. If equity is $300,000 and liabilities are $192,000, then assets equal: (Points : 2) 
$108,000
$192,000
$300,000
$492,000
$792,000

Calculation: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

12. Risk is: (Points : 2) 
Net income divided by average total assets
The reward for investment
The uncertainty about the expected return that will be earned from an investment
Unrelated to expected return