Question

The following statements all pertain to the accounting cycle. Which of these statements is wrong?

a. The accounting cycle involves a series of steps in recording, processing, and summarizing financial transactions.
b. Adjusting entries are made at the end of the accounting period to ensure that the financial statements reflect the accrual basis of accounting.
c. Closing entries are made at the beginning of the accounting period to prepare the books for recording new transactions.
d. Financial statements are prepared at the end of the accounting cycle to provide information about the company's financial performance and position.

Answer 1

The correct answer is c.

Step-by-step explanation:

Closing entries are made at the beginning of the accounting period to prepare the books for recording new transactions. This statement is incorrect because closing entries are actually made at the end of the accounting period to transfer the balances of temporary accounts (revenue, expense, and dividend accounts) to the retained earnings account.

The accounting cycle begins with identifying and analyzing transactions, then recording them in the journal, posting to the ledger, preparing a trial balance, making adjusting entries, preparing financial statements, making closing entries, preparing a post-closing trial balance, and finally, analyzing and interpreting the financial information.