TRUE if the statement is correct. Write FALSE if the statement is incorrect and identify the word/group of words that made the statement incorrect.

1. The income statement shows the types and amounts of revenues and expenses for the accounting period.

2. The amount for owner's Withdrawals will appear in the Income Statement columns of a worksheet.

3. The Adjusted Trial Balance columns of the worksheet are prepared by combining the Trial Balance and

Adjustments columns of the worksheet.

4. The balances of the Accumulated Depreciation accounts will appear on the credit side of the worksheet's Balance

Sheet columns.

5. Financial statements are confidential documents which are available only to the owner of the business.

6. Income and expense accounts are moved to the balance sheet columns of the worksheet.

7. The balance sheet provides the financial statement user the type and amounts of each asset, liability and capital

account at a particular date.

8. Cash flow statement reports the amount of cash received and disbursed during the period.

9. The worksheet is a type of accountant's working paper.

10. Buying and producing goods and services are examples of operating activities.

11. Liquidity refers to the availability of cash in the near future after taking account of the financial commitments over

this period,

12. When the Income Statement columns of the worksheet are initially footed, they should be out of balance by the

amount of profit or loss.

13. Assets, liabilities, capital and withdrawal accounts are extended to the Income Statement columns of the

worksheet.

14. The worksheet helps the accountant discover existing posting and calculation errors.

15. An income statement relates to a specified period while a balance sheet shows the financial position of the entity

at a particular date.

16. Financial flexibility is the ability to take effective actions to alter the amounts and timings of cash flows so that it

can respond to unexpected needs and opportunities.

17. When the Balance Sheet columns of the worksheet are initially footed, they should be in balance.

18. The worksheet is a convenient device for completing the accounting cycle.

19. The excess of expenses over revenues is called loss.

20. The statement of changes in equity relates the income statement to the balance sheet by showing how the

owner's Capital account changed during the accounting period.

21. Accounting policies are the specific principles, bases, conventions, rules and practices adopted by an enterprise

in preparing and presenting financial statements.

22. Paying taxes to the government is an example of a financing activity.

23. On a worksheet, the balance of the owners Capital account is its ending amount for the period.

24. An important use of the worksheet is as an aid in the preparation of financial statements.

25. The statement of cash flows discloses significant events related to the operating, investing, and financing

activities of a business.

26. The purchase of land is an example of an investing activity.

27. Solvency refers to the availability of cash over the longer term to meet financial commitments as they fall due.

28. The purchase of equipment is an example of a financing activity.

29. The balance sheet is also known as the statement of financial position.

30. The statement of changes in equity discloses the withdrawals during the period.

31. The post-closing trial balance will have fewer accounts than then-adjusted trial balance.

32. In the accounting cycle, closing entries are prepared before adjusting entries.

33. After all closing entries have been entered and posted, the balance of the Income Summary account will be zero.

34. A reversing entry is a journal entry which is the exact opposite of a related adjusting entry made at the end of the

period.

35. Closing entries clear income and expense accounts at the end of the period.

36. Closing entries result in the transfer of profit or loss into the owner's Capital account.

37. The final trial balance is called a post-closing trial balance.

38. Nominal account balances are reduced to zero by closing entries.

39. The post-closing trial balance contains asset, liability, withdrawal and capital accounts.

40. The adjusting entries involving Rent Receivable and Salaries Payable could be reversed.

41. The post-closing trial balance will contain only real accounts.

42. The Income Summary account appears in the income statement.

43. The Income Summary account is used to close the income and expense accounts.

44. An expense account is closed with a debit to the expense account and a credit to Income Summary.

45. Post-closing trial balance tests the equality of the accounts after the adjustments and the closing entries are

posted.

46. Reversing entries can be made for deferrals but not for accruals.

47. The purpose of reversing entries is to simplify the bookkeeping process.

48. During the closing process, revenues are transferred to the credit side of the Income Summary account.

49. Reversing entries are made to correct errors in the accounts.

50. There is sufficient information on a post-closing trial balance to prepare an income statement.