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College Accounting (Book Only): A ...

12th Edition
Cathy J. Scott
Publisher: Cengage Learning
ISBN: 9781305084087
BuyFind

College Accounting (Book Only): A ...

12th Edition
Cathy J. Scott
Publisher: Cengage Learning
ISBN: 9781305084087

Solutions

Chapter
Section
Chapter 5, Problem 1QY
Textbook Problem

What is the third step in the accounting cycle?

  1. Analyze source documents and record business transactions in a journal.
  2. Prepare a post-closing trial balance.
  3. Journalize and post the closing entries.
  4. Prepare a trial balance.

Expert Solution
To determine

Find the correct option, the option that indicates the third step in accounting cycle.

Answer to Problem 1QY

The correct answer is option (d).

Explanation of Solution

Accounting cycle: The whole process of identifying, sorting, analyzing, and recording the transactions, journalizing the transactions, posting the entries, preparation of trial balance, updating the adjustments in worksheet, preparing financial statements, and closing the books, is referred to as accounting cycle.

Steps in accounting cycle:

  1. Identify and sort the source documents, and record the business transactions.
  2. Post the journal entries to the ledger accounts.
  3. Prepare trial balance.
  4. Identify and record the adjustments on the work sheet.
  5. Complete work sheet.
  6. Record the adjusting entries and post the entries.
  7. Prepare financial statements from the balances of the accounts in the ledgers on work sheet.
  8. Journalize the closing entries and post the entries.
  9. Prepare a post-closing trial balance.

Justification for correct answer: Accounting cycle is the complete process of recording transactions, journalizing, posting, and preparation of financial statements. As per the steps in accounting cycle, the preparation of trial balance is the third step of accounting cycle process. Hence, option (d) is correct.

Justification for incorrect answers:

  • Option (a) is incorrect because identifying and sorting the source documents, and recording the business transactions is the first step of accounting cycle.
  • Option (b) is incorrect because preparation of post-closing trial balance is the ninth step in accounting cycle.
  • Option (c) is incorrect because journalizing and posting closing entries is the eighth step in accounting cycle.
Conclusion

Therefore, option (d) is correct answer.

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Chapter 5 Solutions

College Accounting (Book Only): A Career Approach
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Ch. 5 - What is the purpose of the Income Summary account?...Ch. 5 - What is the purpose of the post-closing trial...Ch. 5 - Write the third closing entry to transfer the net...Ch. 5 - When would revenue and expenses be recorded if a...Ch. 5 - What are interim financial statements? Why would a...Ch. 5 - Classify the following accounts as real...Ch. 5 - The ledger accounts after adjusting entries for...Ch. 5 - As of December 31, the end of the current year,...Ch. 5 - The Income Statement columns of the work sheet of...Ch. 5 - The Income Statement columns of the work sheet of...Ch. 5 - After all revenue and expenses have been closed at...Ch. 5 - Identify whether the following accounts would be...Ch. 5 - Considering the following events, determine which...Ch. 5 - Indicate with an X whether each of the following...Ch. 5 - Prepare a statement of owners equity for The...Ch. 5 - After the accountant posted the adjusting entries...Ch. 5 - The partial work sheet for Ho Consulting for May...Ch. 5 - The account balances of Bryan Company as of June...Ch. 5 - Williams Mechanic Services prepared the following...Ch. 5 - After the accountant posted the adjusting entries...Ch. 5 - The partial work sheet for Emil Consulting for...Ch. 5 - The account balances of Miss Beverlys Tutoring...Ch. 5 - Toms Catering Services prepared the following work...Ch. 5 - Rather than going directly to college, some...Ch. 5 - Your uncle owns a small sole proprietorship. He...Ch. 5 - The post-closing trial balance submitted to you by...Ch. 5 - You are preparing a post-closing trial balance for...Ch. 5 - The bookkeeper has completed a work sheet and has...Ch. 5 - This problem is designed to enable you to apply...Ch. 5 - This problem is designed to enable you to apply...Ch. 5 - After the adjusting entries are recorded and...

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