 Hello, in this presentation we will take a look at some multiple choice questions related to the closing process and financial statements. First question. A classified balance sheet A is not often used B groups items into categories of assets liability and equity C presents information in a way that makes it easier to calculate the current ratio D includes more accounts than an unclassified balance sheet and E is not usually provided to external users. Once again, a classified balance sheet is we're going to go through these and check them off or cross them out as we go and see if we can narrow this down A is not often used. So a classified balance sheet now the classified balance sheet is going to be is going to be the one that we typically will use it's going to basically break down the balance sheet into those normal type of classes we have the current assets and long-term assets the property plant equipment the current liabilities in the long-term liabilities rather than just having just everything in terms of assets liabilities and equity we're going to have the subgroups in other words for a classified balance sheet. So it's going to be the norm so I'm going to cross that out it's going to be the most often used B groups items into categories of assets liabilities and equity now that you might say that that's kind of true because the balance sheet does have those groups assets liabilities and equity so that looks kind of good but there are some subgroups too so I'm just going to leave that one for now C says presents information in a way that makes it easier to calculate the current ratio I'm going to go ahead and leave that for now D then says includes more accounts than an unclassified balance sheet and this one's a little tricky actually because it does have more account categories but not more accounts so this one this one can be a little tricky and you got to be on the terminology because we're going to have the same number of counts mean we're going to have an asset section while we'll have cash while the counts receivable will have a you know property plant any equipment or not property plan that will have equipment we'll have buildings and whatnot but the subcategories will differ if it was just like a an unclassified balance sheet they would all just be listed under assets all the accounts and if they're classified they would be listed and grouped into the category so there's the same number of accounts just grouped in different formats so this one's actually not it I'm going to cross that out and then e is not usually provided to external users that's not true because mainly when we think of the financial statements we think of external users and once again the classified balance sheet is the one most often used note that a here and e are really similar so when we when we work these multiple choice questions a says is not often used and e says is not provided to external users that's pretty much the same thing because we provide these financial statements for the external users that's who we prepare them for so because those are the same week if we didn't really know we can cross those two out probably by saying hey it can't be both of those those are pretty much the same thing let's say it must not be either of those so we're left with B and C so once again the question a classified balance sheet a groups items into categories of assets liabilities and equity that's B and C says presents information in a way that makes it easier to calculate the current ratio now the current ratio is calculated as current assets over current liabilities and so we have to kind of know that that's one of our most common type of ratios and note that that's breaking this out into more groups into current assets and current liabilities so if we did not have a classified balance sheet which already does that breakout it would be more difficult for us to to you know figure out what the current assets and current liabilities are so C is actually the correct answer here the reason B is not correct is because although the classified balance sheet does group in accordance with assets liability and equity the main groups it does have also the subgroups so C is more correct because it's saying it's referring to the fact that it has these subgroups so the answer once again a classified balance sheet C presents information in a way that makes it easier to calculate the current ratio next question the closing process is necessary to a calculate net income B close all permanent accounts C close out net income and owner draw for the period to the owner capital account D comply with regulations once again the closing process is necessary to a calculate net income the closing process isn't really used to calculate net income because remember where we are at or after we've already prepared the adjusted trial balance we've prepared the financial statements we've made balance sheet income statement statement of equity income statement calculating net income the process after that is the closing process clearing out zeroing out net income making net income now zero in essence by closing out revenue and expense accounts to prepare for the next time period so it's not going to be that B says all close all permanent accounts now that is you might think that that might be right because one of the two it's going to close not the permanent however but the temporary accounts so this is kind of backwards we're not going to close the permanent we're going to close the temporary and then C says close out net income or owner draw for the period to the owner's capital account that sounds pretty good I'm going to keep that for now and D says comply with regulations now you might say hey you know that's generally accepted accounting principles to do this and so in a sense there may be regulations that that we're complying with in order to prepare the closing process but C might be more more specific so if we look at C close out net income and owner draws for the period to the owner's capital account that sounds pretty specific and oftentimes if you see kind of a some shorter type of responses and then a long detailed response that seems very specific to something you want to take a look at that that detailed response maybe that's maybe there's a reason it's describing the whole process here and so this is basically it sees is what is happening we're closing out what is the closing process it closes out net income revenue and expense accounts and then it closes out draws those being all the temporary accounts for a sole provider and it closes them out to the owner capital account so D we're going to say that's not the most you know defined answer C looks like the best answer here once again that being the closing process is necessary to see close out net income and owner draw for the period to the owner's capital account next question the final step in the accounting cycle is a posting transactions be the adjusted trial balance C financial statements D the post closing trial balance and E preparing a worksheet once again the final step to the accounting cycle is posting transactions that generally happens during the month so we were gonna basically record the transactions and post them to the general ledger so that's kind of like the first thing that as part of that's towards the beginning so I'm gonna cross that out the adjusted trial balance that's getting towards in remember we have the normal journal entries and then we have the adjusting entries that are gonna have what we make the unadjusted trial balance and then we enter the adjusting entries to get to the adjusted trial balance but it's not quite there yet because we are ultimate goal is really to make the financial statements so they just the trial balance then will be used to create the financial statements so I'm gonna cross that out C says financial statements and I just said that that's basically our ultimate goal so I'm gonna keep that but I'm gonna keep going through them because there's kind of a this might not be it and then D says the post closing trial balance now the post closing trial balance says closing in it and when we're talking about the final step to the accounting cycle it might have something that says closing in it if it's a legitimate name so I'm gonna keep that one and then he says preparing a worksheet now the worksheet is part of the process but obviously we have to fill in the worksheet so I wouldn't say that just preparing a worksheet it's gonna it's gonna be that the end test we're gonna have to to fill it out so I'm gonna cross that one out and we're left with C and D so once again the question the final step in the accounting cycle is financial statements or the post closing trial balance now it notes that when we're looking at this work we're considering the name of these multiple choice questions with the kind of like the section we're on is the closing section so note that the answer just given that and just be mindful of this when you're looking at multiple choice questions the answer is probably gonna relate more to the to the closing process although we are talking about financial statements as well so but some multiple question multiple choice questions can be answered in that format just by knowing what topic are we on that's probably gonna be one of the related things that will be there so it actually is the post closing trial balance and I know I said that the financial statements are the kind of end goal and they are really kind of the end goal but but then there's like the after that the end goal of cleaning up the shop kind of thing so it's kind of like if you if you have a concert or something the actual concert is the main event that's the end goal to generate revenue by performing the concert and then after the concert is over you got to clean everything up the cleaning everything up is really the end thing in the cycle but it's really there to prepare for the next cycle and the main event is kind of the concert and here the main event is the financial statements but it's not really the answer because we have to then clean up after the financial statement and that's gonna be the post closing trial balance that we'll do that that's the final thing we will have after the closing entries will be left with a post closing trial balance having just temporary accounts of zeros which will then be ready for us to move forward in the next time period so once again final answer the final step the final step to the accounting cycle is D the post closing trial balance