BUS103: Introduction to Financial Accounting

1. True. The three trial balances are the unadjusted trial balance, the adjusted trial balance, and the post-closing trial balance. The first two trial balances appear on the work sheet.
2. False. If a debit-balance account (such as Prepaid Rent) is credited in the adjustment, the amount in the Adjustments columns is deducted from the amount in the Trial Balance columns to determine the amount for that item in the Adjusted Trial Balance columns.
3. True. The net loss appears in the Income Statement credit column to balance the Income Statement columns. Then the loss appears in the Statement of Retained Earnings debit column because it reduces Retained Earnings.
4. True. All of these accounts are closed, or reduced to zero balances, as a result of the closing process.
5. False. All revenue and expense accounts have zero balances after closing.
6. False. Some manual accounting systems are still in use.
   
   

1. b. The other accounts are very likely to be adjusted. The Land account would be adjusted only if an error has been made involving that account.

2. c. The Adjusted Trial Balance columns should balance before items are spread to the Income Statement, Statement of Retained Earnings, and Balance Sheet columns. Therefore, if the Balance Sheet columns do not balance, the error is likely to exist in the last six columns of the work sheet.

3. d. The net income for the period does not appear in the balance sheet. It does appear in all of the other places listed.

4. a. The Dividends account is closed to the Retained Earnings account rather than to the Income Summary account.

5. b. Plant, property, and equipment is one of the long-term asset categories. Response (a) should not include equipment. Response (c) should not include notes receivable. Stockholders' equity is not subdivided into current and long-term categories.