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