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Whitney Riddle Financial Accounting October 3, 2012

Chapter 4 Questions

1. “A worksheet is a permanent accounting record and its use is required in the accounting cycle.” Do you agree? Explain. - I disagree, with this statement because a worksheet is not a permanent accounting record it is neither a journal nor a part of the general ledger. A worksheet is a device used preparing adjusting entries and the financial statements.

2. Explain the purpose of the worksheet.
- The purpose of the worksheet is to prepare adjusting entries and the financial statements. The worksheet has five steps for preparing it; Step 1: Prepare a trial balance on the worksheet. Step 2: Enter the adjustments in the adjustments columns. Step 3: Enter adjusted balances in the adjusted trial balance columns. Step 4: Extend adjusted trial balance amounts to appropriate financial statement columns. Step 5: Total the statement columns compute the net income (or net loss), and complete the worksheet.

6. Identify the account(s) debited and credited in each of the four closing entries, assuming company has net income for the year. 1. Debit each revenue account for its balance, and credit Income Summary for total revenues. 2. Debit Income Summary for total expenses, and credit each expense account for its balance. 3. Debit Income Summary and credit Owner’s Capital for the amount of net income. 4. Debit Owner’s Capital for the balance in the Owner’s Drawing account, and credit Owner’s drawing for the same amount.

11. Indicate, in the sequence in which they are made, the three required steps in the accounting cycle that involve journalizing. 1. Journalize the transactions
2. Journalize and posting adjusting entries
3. Journalize and post closing entries.

12. Identify, in the sequence in which they are prepared, the three trial balances that are often used to report financial...
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