Question

The income summary has a zero balance after which step in the closing process

	a.	Step 2
	b.	Step 3
	c.	The income summary is permanent and therefore not closed
	d.	Step 4
	e.	Step 1

On June 30, the Cash account of Majeau Company had a normal balance of $4,300. During July the account was debited for a total of $3,400 and credited for a total of $3,600. What was the balance in the Cash account on August 1?

	a.	$4,100 debit
	b.	$4,100 credit
	c.	$3,400 debit
	d.	$3,400 credit
	e.	$-0

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is

	a.	recorded as a credit to an unearned revenue account
	b.	recorded as a credit to a prepaid expense account
	c.	recorded as a debit to a prepaid expense account
	d.	recorded as a debit to an unearned revenue account
	e.	not recorded in the accounting records

Answer 1

• Question #1
  Correct Answer = Option ‘B’ After Step 3, the balance in Income Summary becomes ZERO, because remaining balance (Net Income or Loss) is CLOSED to Retained earnings in Step #3.
• Question #2
  Balance in Cash account on Aug 1 = June 30 Balance [beginning] + total debits (received) – total credits (paid)
  = $ 4300 + 3400 – 3600
  = $ 4,100 Debit (Cash has always DEBIT balance)
  Correct Answer = Option ‘A’ $ 4100 Debit
• Question #3
  Correct Answer = Option ‘A’
  --A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is ‘recorded as a credit to an unearned revenue account’.
  --When advance cash is received, Cash account is debited, while ‘unearned revenue account’ which is a liability account gets credited.