Eye openers

Eye Openers

1. Why do some accountants prepare an end-of-period spreadsheet (work sheet)?

2. Is the end-of-period spreadsheet (work sheet) a substitute for the financial statements? Discuss.

3. In the Income Statement columns of the end-of-period spreadsheet (worksheet) for Steward Consulting Co. for the current year, the Debit column total is $675,450 and the Credit column total is $915,800 before the amount for net income or net loss has been included. In preparing the income statement from the end-of-period spreadsheet (work sheet), what is the amount of net income or net loss?

4. Describe the nature of the assets that compose the following sections of a balance sheet: (a) current assets, (b) property, plant, and equipment.

5. What is the difference between a current liability and a long-term liability?

6. What types of accounts are referred to as temporary accounts?

7. Why are closing entries required at the end of an accounting period?

8. What is the difference between adjusting entries and closing entries?

9. Describe the four entries that close the temporary accounts.

10. What is the purpose of the post-closing trial balance?

11. (a) What is the most important output of the accounting cycle? (b) Do all companies have an accounting cycle? Explain.

12. What is the natural business year?

13. Why might a department store select a fiscal year ending January 31, rather than a fiscal year ending December 31?

14. The fiscal years for several well-known companies are as follows:

Company Fiscal Year Ending Company Fiscal Year Ending

Kmart January 30 Toys “R” Us, Inc. February 3

JCPenney January 26 Federated Department February 3

Stores, Inc.

Target Corp. January 28 The Limited, Inc. February 2

What general characteristic shared by these companies explains why they do not have fiscal years ending December 31?

Complete the exercise: