Acounting Chapter 9-10

compound entry

A(n) ____ is a journal entry with two or more debits or two or more credits.

post-closing trial balance

A(n) ____ is prepared to prove that debits in the ledger accounts are equal to the credits after the closing entries have been posted.

temporary capital accounts

Accounts that start an accounting period with zero balances are called ____.

Closing entries transfer the net income or net loss to the withdrawals account.

False

When expense accounts are closed, the Income Summary account is credited.

False

report form

In the ____, the classifications of balance sheet accounts are shown one under the other.

Which of the following accounts is not closed at the end of the accounting period?

Klaus Braun, Capital

Balance sheet section of the work sheet

One source of information for completing the balance sheet is the ____.

permanent accounts

Only ____ and their balances are listed on the post-closing trial balance.

Which of the following statements is true?

The Income Summary account is located in the owner's equity section of the general ledger.

Income Summary Account

The ____ is a general ledger account used to accumulate and summarize the revenue and expenses for a period

statement of changes in owner's equity

The ____ is completed as a support document for the balance sheet.

on a specific date

The balance sheet reports financial information ____.

Closing entries are used to transfer the net income or net loss for the accounting period to the ____.

capital account

Financial reports are often prepared in pencil.

false

A net income will increase the owner's capital account

true

balance sheet

A(n) ____ is the financial statement that reports the final balances in all asset, liability, and owner's equity accounts at the end of the accounting period.

Income Statement section of the work sheet

The information needed to prepare the income statement comes from the____.

Current liabilities

____ are debts of the business that must be paid within the next accounting period..

closing entries

____ are made to close out or reduce to zero the balance of certain general ledger accounts

return on sales

____ indicates what percentage of net sales represents profit.

ratio analysis

____ is a comparison of two items on a financial statement, resulting in a percentage that is used to evaluate the relationship between the two items. ratio analysis

net income or net loss

____ is reported on the income statement.

financial statements

____ summarize the changes resulting from business transactions that have occurred during an accounting period

If a business has a net income for the period, the journal entry to close the balance of the Income Summary account is ____.

a debit to Income Summary, a credit to owner's capital

The balance of the revenue account is transferred to the ____.

credit side of the Income Summary account

Before closing entries are journalized and posted, the Income Summary account in the general ledger has a normal credit balance.

false

Closing the revenue account is the second closing entry.

false

Return on sales is calculated by dividing net sales by net income.

false

The Trial Balance section of the work sheet provides the information used in preparing the income statement.

false

The balance sheet is prepared before the statement of changes in owner's equity.

false

The changes in the Cash in Bank account are reported in the statement of changes in owner's equity.

false

The heading is the same on all three financial statements.

false

The income statement represents the basic accounting equation.

false

The information on the statement of changes in owner's equity is used in preparing the income statement.

false

The revenue, expense, and the Income Summary accounts are included on the statement of changes in owner's equity.

false

Transferring the expense account balances to the Income Summary account is the

second closing entry

Accounts that start each new accounting period with zero balances are ____.

temporary accounts

After the closing entries have been posted, the balance in the capital account reflects the net income or net loss and the withdrawals for the period.

true

Current assets are those used up or converted to cash during the normal operating cycle of a business.

true

If a business reports a net loss for the period, the journal entry to close the Income Summary account would be a debit to capital and a credit to Income Summary.

true

Net income or net loss is the difference between total revenue and total expenses over a specific period of time.

true

Revenue and expense accounts must be closed out because their balances apply to only one accounting period.

true

The Income Summary account is a simple income statement in the ledger.

true

The Income Summary account is located in the owner's equity section of the general ledger.

true

The balance sheet reports the final balances of the permanent accounts at the end of the fiscal period.

true

The last step in the accounting cycle is the preparation of the post-closing trial balance.

true

The net income or net loss reported on the income statement must be the same as the net income or net loss calculated on the work sheet.

true

The primary financial statements prepared for a sole proprietorship are the income statement and the balance sheet.

true

The statement of changes in owner's equity summarizes the effects on the capital account of the various business transactions that occurred during the period.

true

To close a revenue account, debit it for the amount of its credit balance.

true

To close the withdrawals account, the amount of its balance is debited to the capital account and credited to the withdrawals account.

true