Chapter four study module

Questions I struggled with:

• On the worksheet, after totaling the debit and credit Balance Sheet columns, the difference is the amount of Net Income or Net Loss for the period.

Questions I got wrong:

• A company wants a current ratio above 1. For example if a company has a current ratio of 2, this means the company has $2 in Current Assets for every $1 in Current Liabilities. In order to be able to pay bills, you need more in Current Assets than you have in Current Liabilities.

• The Rent Expense account has a normal debit balance. To close out the Expense account you would credit Rent Expense and debit Income Summary.

  Previous

• Only permanent accounts appear on the post-closing trial balance. Accounts Receivable (an Asset) is a permanent account and appears on the post-closing trial balance.

• Cash is an Asset, and Assets are considered permanent accounts.