1. 2 3 4. 5 8 9. TRUE/FALSE A ledger is where a company first records transactions and other selected events. Nominal (temporary) accounts are revenue, expense, and dividend accounts and are periodically closed Real (permanent, accounts are revenue, expense, and dividend accounts and are periodically closed An example of an internal event would be a flood that destroyed a portion of a company's inventory All liability accounts and stockholders' equity accounts are increased on the credit side and decreased on the debit side In general, debits refer to increases in account balances, and credits refer to decreases. 7. The first step in the accounting cycle is the joumalizing of transactions and selected other events One purpose of a trial balance is to prove that debits and credits are equal in the general ledger A general joumal chronologically lists transactions and other events, expressed in terms of debits and credits to accounts If a company fails to post one of its journal entries to its general ledger, the trial balance will not show an equal amount of debit and credit balance accounts Adjusting entries for prepayments record the portion of the prepayment that represents the expense incurred or the revenue recognized in the current accounting period. An adjustment for wages expense, earned but unpaid at year end, is an example of an accrued expense The book value of any depreciable asset is the difference between its cost and its salvage value 14. The ending retained eamings balance is reported on both the retained earnings statement and the balance sheet The post-closing trial balance consists of asset, liability, stockholders equity, revenue and expense accounts 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. 17 Total stockholdersequity consists of common stock and the earnings retained in the business 10 11 12 13 15 16 18 19 The accrual-basis of accounting recognizes revenue when the performance obligation is satisfied and expenses when cash is paid Reversing entries are made at the end of the accounting cycle to comect errors in the original recording of transactions An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries. 20