June 27 Chapter 3

1.Real (permanent) accounts are revenue, expense, and dividend accounts and are periodically closed. 2.Under International Financial Reporting Standards (IFRS) the dividends account is considered a real account. 3.In general, debits refer to increases in account balances, and credits refer to decreases. 4.The first step in the accounting cycle is the journalizing of transactions and selected other events. 5.Basic steps in the recording process include transferring the journal information to the appropriate account in the statement of financial position. 6.The trial balance uncovers any errors in journalizing and posting prior to preparation of the statement of financial position. 7.The trial balance will not balance when a company debits two statement of financial position accounts and no income statement accounts. 8.The book value of any depreciable asset is the difference between its cost and its salvage value. 9.The accrual basis recognizes revenue when earned and expenses in the period when cash is paid. 10.An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries.

1.The ending retained earnings balance is reported on both the retained earnings statement and the statement of financial position. 2.Each adjusting entry affects one statement of financial position account and one income statement account. 3.An adjustment for wage expense, earned but unpaid at year end, is an example of an accrued expense. 4.A general journal chronologically lists transactions and other events, expressed in terms of debits and credits to accounts. 5.Nominal (temporary) accounts are revenue, expense, and dividend accounts and are periodically closed. 6.Companies can prepare the income statement and the statement of financial position directly from the adjusted trial balance. 7.Under International Financial Reporting Standards (IFRS) the cash-basis method of accounting is accepted. 8.Reversing entries are made at the end of the accounting cycle to correct errors in the original recording of transactions. 9.It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period. 10.The closing process transfers all income statement items to their related statement of financial position accounts (for example, salaries expense transfers to salaries payable).