Accounting I: Chapter 8
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
