Accounting 2010- Exam 2 Questions
with Guaranteed Pass Solutions 2025-
2026 Set.
CHAPTER 4 - Answer
All journal entries adjustments have what 2 things? - Answer 1) balance sheet account
2) income statement
True or False?
A cash account is always in an adjusting entry - Answer False, a cash account is NEVER in an
adjusting entry
Why do we adjust entries in accounting? - Answer B/c the matching principle says we need to
record expenses in the same period as revenue is generated; also to ensure assets and liabilities
are reported at appropriate amounts
How would not adjusting entries affect the financial statement? - Answer there wouldn't be
enough expenses, it would understate or overstate net income
What are the 2 purposes of the closing process? - Answer 1) Transfer net income/loss and
dividends to retained earnings
2) Establish zero balances in all income statement and dividend accounts
What happens to the revenue, expense, and dividends accounts at the end of the year? -
Answer They are closed and moved to their permanent home in retained earnings
What is the proper order for ordering financial statements? - Answer 1) Income statement
2) Statement of Retained earnings
3) Balance sheet
4) Cash flow
CHAPTER 5 - Answer
, Outstanding check - Answer Time lag- when you write a check to someone but the bank
doesn't know about it until that someone deposits it into their account. The bank corrects this.
NSF checks - Answer Not sufficient funds checks- rejected or bounced checks, occur when the
check writer didn't have sufficient funds in their account to cover the amount of the check.
Reduce cash balance.
Why are the bank's statement and the company's book reconciled? - Answer So the balances
in each account agree.
Updates to the bank statement= updates to the company's books. Provides an up-to-date cash
balance!
What does it mean when a check clears? - Answer 1) the check has been withdrawn from the
check writer's account
2) the check has been deducted from the check writer's bank statement
Segregation of Duties - Answer Internal control example of not making one employee
responsible for all parts of a process. This helps to ensure an employee doesn't make a mistake
or commit an act of dishonesty.
What are 3 limitations of internal control? - Answer costs (benefits always exceed costs),
human error, fraud
Internal control - Answer Consists of actions taken by people at every level of an organization
relating to operations (efficient & effective work & protect assets), reporting (reliable & timely
accting info), and compliance (adhere to laws and regulations)
What is a bank reconciliation? - Answer key to internal control; verifies/compares the accuracy
of both the bank statement and an individual's/company's cash records. This is done monthly by
a company.
True or False?- The bank statement is always presented from the bank's point of view - Answer
True
True or False?- Only the items in the company's books side of the bank reconciliation need to be
recorded in the company's records for the journal entry - Answer True
with Guaranteed Pass Solutions 2025-
2026 Set.
CHAPTER 4 - Answer
All journal entries adjustments have what 2 things? - Answer 1) balance sheet account
2) income statement
True or False?
A cash account is always in an adjusting entry - Answer False, a cash account is NEVER in an
adjusting entry
Why do we adjust entries in accounting? - Answer B/c the matching principle says we need to
record expenses in the same period as revenue is generated; also to ensure assets and liabilities
are reported at appropriate amounts
How would not adjusting entries affect the financial statement? - Answer there wouldn't be
enough expenses, it would understate or overstate net income
What are the 2 purposes of the closing process? - Answer 1) Transfer net income/loss and
dividends to retained earnings
2) Establish zero balances in all income statement and dividend accounts
What happens to the revenue, expense, and dividends accounts at the end of the year? -
Answer They are closed and moved to their permanent home in retained earnings
What is the proper order for ordering financial statements? - Answer 1) Income statement
2) Statement of Retained earnings
3) Balance sheet
4) Cash flow
CHAPTER 5 - Answer
, Outstanding check - Answer Time lag- when you write a check to someone but the bank
doesn't know about it until that someone deposits it into their account. The bank corrects this.
NSF checks - Answer Not sufficient funds checks- rejected or bounced checks, occur when the
check writer didn't have sufficient funds in their account to cover the amount of the check.
Reduce cash balance.
Why are the bank's statement and the company's book reconciled? - Answer So the balances
in each account agree.
Updates to the bank statement= updates to the company's books. Provides an up-to-date cash
balance!
What does it mean when a check clears? - Answer 1) the check has been withdrawn from the
check writer's account
2) the check has been deducted from the check writer's bank statement
Segregation of Duties - Answer Internal control example of not making one employee
responsible for all parts of a process. This helps to ensure an employee doesn't make a mistake
or commit an act of dishonesty.
What are 3 limitations of internal control? - Answer costs (benefits always exceed costs),
human error, fraud
Internal control - Answer Consists of actions taken by people at every level of an organization
relating to operations (efficient & effective work & protect assets), reporting (reliable & timely
accting info), and compliance (adhere to laws and regulations)
What is a bank reconciliation? - Answer key to internal control; verifies/compares the accuracy
of both the bank statement and an individual's/company's cash records. This is done monthly by
a company.
True or False?- The bank statement is always presented from the bank's point of view - Answer
True
True or False?- Only the items in the company's books side of the bank reconciliation need to be
recorded in the company's records for the journal entry - Answer True
