Completing the Accounting Cycle for a Sole Proprietorship

Compound Entry

A journal entry with two or more debits or two or more credits.

Closing Entries

Journal entries made to close, or reduce to zero, the balances in the temporary capital accounts and to transfer the net income or net loss for the period to the capital account.

Post-Closing Trial Balance

Prepared to verify that toal debits equal total credits after the closing entries are posted.

Income Summary Account

The account in the general ledger used to summarize the revenue and expenses for the fiscal period.

closing entries

The general ledger account used to accumulate and summarize the revenue and expenses for the period.

Permanent Accounts

The only accounts and balances listed on the post-closing trial balances.

Zero Balances

The temporary capital accounts are not listed on the post-closing trial balance because of this.

Post-Closing Trial Balance

The trial balance prepared after the closing entries have been posted.

Income Summary

Used to record transactions involving revenue, expenses, or withdrawals.

"Closing Entries"

Written in the Description column of the general journal to explain the entries that close out the balances in the temporary capital accounts.

Transferring the revenue account balances to the Income Summary account is the a. first closing entry. b. second closing entry. c. third closing entry. d. fourth closing entry.

a. first closing entry.

Transferring the expense account balances to the Income Summary account is the a. first closing entry. b. second closing entry. c. third closing entry. d. fourth closing entry.

b. second closing entry.

Closing entries are used to transfer the net income or net loss for the period to the a. revenue account. b. withdrawals account. c. capital account. d. Cash in Bank account.

c. capital account.

Transferring the Income Summary account balances to the Capital account is the a. first closing entry. b. second closing entry. c. third closing entry. d. fourth closing entry.

c. third closing entry.

Which of the following accounts does not require a closing entry? a. Fees. b. Income Summary. c. Maintenance Expense. d. Klaus Braun, Capital.

d. Klaus Braun, Capital.

Transferring the withdrawal account balances to the Capital account is the a. first closing entry. b. second closing entry. c. third closing entry. d. fourth closing entry.

d. fourth closing entry.

Accounts that start each new fiscal period with zero balances are a. permanent. b. assets. c. liabilities. d. temporary.

d. temporary.