Accounting I: Chapter 8

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The Income Summary account has a normal debit balance.

False

Adjusting Journal Entries

Journal entries recorded to update general ledger accounts at the end of a fiscal period

Fiscal Period

The length of time for which a business summarizes its financial information and reports its financial performance.

Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.

True

The journal entry to close Income Summary when there is a net income is

debit income summary, credit owner's capital

When the total expenses are greater than the total revenues

the income summary has a debit balance

Work Sheet

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements

General Ledger

A ledger that contains all accounts needed to prepare financial statements

Post-Closing Trial Balance

A trial balance prepared after the closing entries are posted

Accounting Period Cycle

Accounting Concept applied when changes in financial information are reported for a specific period of time in the form of financial statements

Matching Expenses with Revenue

Accounting Concept applied when revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period

Permanent Accounts

Accounts used to accumulate from one fiscal period to the next

Temporary Accounts

Accounts used to accumulate information until it is transferred to the owner's capital account

At the end of a fiscal period, the balances of permanent accounts are summarized and transferred to the owner's capital account.

False

Permanent accounts are used to accumulate information until it is transferred to the owner's capital account.

False

Temporary accounts include assets, expenses, and the owner's drawing account.

False

The balances of the liability accounts must be reduced to zero to prepare the accounts for the next period.

False

The drawing account is a permanent account.

False

Closing Entries

Journal entries used to prepared temporary accounts for a new fiscal period

Accounting Cycle

The series of accounting activities included in recording financial information for a fiscal period

Posting

Transferring information from a journal entry to a ledger account

A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are posted.

True

Temporary accounts are also called nominal accounts.

True

Temporary accounts must start each fiscal period with a zero balance.

True

The capital account's new balance after all closing entries are posted is verified by checking it with the amount of capital shown on the balance sheet at the end of the fiscal period.

True

The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period.

True

The series of accounting activities included in recording financial information for a fiscal period is called an accounting cycle.

True

To close a temporary account, an amount equal to its balance is recorded in the account on the side opposite its balance.

True

The accounts that appear on the post-closing trial balance are

assets, liabilities and owner's equity

After the closing entries are posted, the owner's capital account balance should be the same as shown

on the balance sheet for the fiscal period

Accounts used to accumulate information from one fiscal period to the next are

permanent accounts

The last step in the accounting cycle is to

prepare a post-closing trial balance

Income Summary is a

temporary account

After closing entries are posted, the balance in the owner's drawing account should be

zero

Temporary accounts begin each new fiscal period with a

zero balance


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