Question

  Which of these statements is true?
a.A company prepares its set of financial statements after preparing its closing entry.
b. Dividends appear on the Income Statement when they are declared, not when paid.
c. All revenue accounts are closed with credits, and dividends are closed with debits.        
d.All entries are recorded in the journal by date, then posted to the ledger by account.

Answer 1

a. False - Adjusted trial balance is used to prepare financial statements. Closing entries, also called closing journal entries, are entries made at the end of an accounting period to zero out all temporary accounts and transfer their balances to permanent accounts. Financial statements are prepared prior to closing entry.

b. False - Dividends do not appear on the Income Statement, as they are not expenses. Dividends are instead, charge against profits.

c. False - All revenue accounts are closed with debits, and dividends are closed with credits. Revenue accounts being of "income" nature is a credit item. To close this account, it has to be debited. Likewise, Dividends being of "charge/expense" nature is a debit item. To close this account, it has to be credited.

d. True