Accounting 1 Review for Test 2 1. Theory 2. Worksheet 3. Closing entries 4. Merchandise inventory adjustment 5. Inventory counting Part 1. Theory There will be a few multiple choice questions on general theory. Q: You should know what kind of accounts the following are: A: Sales discounts, sales returns and allowances- Contra Sales Purchases-Expanse Purchases discounts, purchases returns and allowances- Contra Expanse Merchandise inventory- Assets Q: You should know that the worksheet is set up in debit/credit format , and that the formal financial statements are set up in subtotal/total format . Q: You should know that after closing entries are prepared, income, expenses, draw, and income summary have zero balances. Q: Current Asset- used up within a year ; Plant asset- last you more than a year . Current Liab./ Plant Liab. Q: Why do I have to do a two-step entry for merchandise inventory? IRS requires it. Q: What accounts are closed out through income summary?
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