ACCT chapter 5

What is the trial balance?

A listing of the ending balance in each account in the general ledger.

What is the first financial statement prepared in the accounting cycle?

The Income Statement.

What are closing journal entries intended to achieve?

Move the balances in the income statement accounts to Retained Earnings and reset those accounts to zero.

What type of accounts are income statement accounts classified as?

Temporary accounts.

What are the two types of accounts in the balance sheet?

Permanent accounts and temporary accounts.

How is Net Income calculated?

Net Income = Operating Revenues - Operating Expenses.

What happens to the retained earnings at the end of the accounting cycle?

They are updated to reflect net income and any dividends paid.

What is the difference between permanent and temporary accounts?

Permanent accounts retain their balances from one period to the next; temporary accounts accumulate balances and reset to zero at the start of a new period.

What is required to prepare the Statement of Stockholders' Equity?

The net income from the income statement.

How do companies close revenue accounts?

By debiting all revenues for their full balance and crediting Retained Earnings.

What composition is included in the income statement structure?

Operating revenues, operating expenses, operating income, other items, pretax income, income tax expense, net income.

What is the adjusting entry process?

Updating the trial balance and preparing the financial statements after making necessary adjustments.

What is Cash Paid during the year for insurance calculated from?

Beginning Balance + Cash Paid - Expense Recognized = Ending Balance.

For the adjustment of Unearned Rent Revenue, what is the calculation for Revenue Recognized?

Revenue Recognized = Beginning Balance + Cash Received - Ending Balance.

What is Kinnick Company's cash paid for taxes calculation based on?

Beginning Balance + Expense Incurred - Cash Paid = Ending Balance.

What is the impact of a Cash Paid out if Beginning Income Taxes Payable is 30,000 and Ending Payable is 25,000?

Cash Paid = 255,000.

What relationship indicates that Income Revenue is larger than Cash Received?

Interest Revenue = Cash Received + 80,000.

What is an income statement also referred to as?

A profit and loss statement.