Accounting Chapter 8

If the beginning balance of Supplies was $2,500.00 and the ending balance of Supplies is $1,750.00, what is the amount of the adjusting entry to Supplies Expense for the period?

$750

A source document is prepared for closing entries

Faulse

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

Faulse

Although the temporary accounts are closed and have zero balances, they still appear on a post-closing trial balance to prove that they've been "zeroed out."

Faulse

If a business incurs a net loss, the closing entry is a credit to the owner's capital account and a debit to the income summary account.

Faulse

Permanent accounts are also referred to as temporary accounts.

Faulse

Temporary accounts begin a new fiscal period with the ending balance from the previous fiscal period

Faulse

The income summary account has a normal debit balance.

Faulse

Information needed for closing entries is found in the ____

Income Statement and Balance Sheet columns of the work sheet

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

Permeant accounts

Adjusting entries are recorded on the next journal page following the page on which the last daily transactions for the month are recorded

True

Preparing a work sheet at the end of each fiscal period to summarize the general ledger information needed to prepare financial statements is an application of the accounting concept Accounting Period Cycle

True

Temporary accounts are not listed on a post-closing trial balance.

True

Temporary accounts must start each fiscal period with a zero balance

True

Temporary accounts show changes in the owner's capital for a single fiscal period.

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 income summary account balance must be reduced to zero to prepare the account for the next fiscal period.

True

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

True

The series of accounting activities included in recording financial information for a fiscal period is called a(n)

accounting cycle

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

adjusting entries.

When total expenses are more than revenue resulting in a net loss, the income summary account has a ___________ balance

debit

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

debit Income Summary; credit owner's capital

If the balance in Prepaid Insurance is a debit of $2,400.00 and the value of insurance coverage remaining at the end of the period is $600.00, what entry should be made to adjust Insurance Expense and Prepaid Insurance?

debit Insurance Expense for $1,800.00 and credit Prepaid Insurance for $1,800.00

The journal entry to adjust Prepaid Insurance is ____

debit Insurance Expense; credit Prepaid Insurance

Withdrawals are assets that the owner takes out of a business and which

decrease the amount of owner's equity.

The ending account balances of permanent accounts for one fiscal period are "zeroed out" for the next fiscal period

faulse

The income summary account is unique because

it does not have a normal balance side

The drawing account is a(n)

neither revenue nor expense account

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

permanent

After the closing entries are posted, the only accounts with balances are ____ accounts

permanent

A temporary account titled Income Summary is used to summarize the closing entries for the

revenue and expense accounts

A trial balance prepared after the closing entries are posted is called a post-closing trial balance

true

Nominal accounts are also known as temporary accounts

true

Only general ledger accounts with balances are included on a post-closing trial balance

true

Information needed for journalizing the adjusting entries is obtained from the

work sheet's Adjustments columns