3. Which of the following accounts will be reduced to zero by a year-end closing entry?

(a) Accumulated Depreciation

(b) Sales Returns and Allowances

(c) Unearned Revenue

(d) Notes Payable

5. Usually financial transactions and events are initially recorded in a:

(a) Chart of Accounts

(b) Journal Entry

(c) Trial Balance

(d) General Ledger

6. The journal entries made at the end of the period to reduce temporary accounts to zero and to update the retained earnings and inventory accounts are:

(a) adjusting entries.

(b) temporary entries.

(c) closing entries.

(d) transaction entries.

7. Which of the following is a temporary (nominal) account?

(a) Mortgage Payables

(b) Retained Earnings

(c) Cash

(d) Unearned Revenue

8. Which of the following statements about the income statement is correct?

(a) The income statement covers a specific point in time.

(b) The elements of the income statement include income from operations and distributions to owners.

(c) The income statement summarizes the results of a company's operations for a period.

(d) All of the above.

9. A company would report its financial statements on a liquidation basis if there was doubt about their future in accordance with which principle?

(a) materiality

(b) going concern

(c) historical cost

(d) conservatism

10. The use of the same accounting principle from period to period, such as always using the straight-line method of depreciation, is preferable because of:

(a) materiality.

(b) verifiability.

(c) neutrality.

(d) consistency.

11. External users of a company's reports do not include

(a) union representatives.

(b) government regulators.

(c) management.

(d) bank loan officers.

12. Companies are not required to produce which of the following in their annual report?

(a) the statement of cash flows

(b) the balance sheets

(c) the statement of changes in stockholders equity

(d) All of the above are required to be presented in a companys annual report.