Accounting I - Chapter 8 Review
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 Income Summary account has a normal debit balance.
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
The last step in the accounting cycle is to
Prepare a post-closing trial balance
A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are posted.
True
Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.
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 to its balance.
True
The accounts that appear on the post-closing trial balance are
assets, liabilities, and owner's capital.
The journal entry to close Income Summary when there is a net income is
debit Income Summary; credit owner's capital.
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.
Income Summary is a(n)
temporary account
When the total expenses are greater than the total revenues,
the Income Summary account has a debit balance.
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