Accounting Review Quiz Chapter 8
The journal entry to close an expense account is
Debit Income Summary for the total expenses; credit each expense account
A source document is prepared for adjusting entries.
False
All accounts in a general ledger are listed on a post-closing trial balance.
False
Permanent accounts are also referred to as temporary accounts.
False
The drawing account is a permanent account.
False
The income summary account has a normal debit balance.
False
Which accounting concept applies when expenses are reported in the same fiscal period that they are used to produce revenue?
Matching Expenses with Revenue
Adjustments are analyzed and planned ____.
On a worksheet
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 ____ accounts.
Permanent
Accounts used to accumulate information until it is transferred to owner's capital accounts are ____ accounts.
Temporary
A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are posted.
True
Adjusting entries are recorded on the next journal page following the page on which the last daily transactions for the month are recorded.
True
Adjustments are first analyzed and planned on a work sheet before the adjusting entries are journalized.
True
At the end of a fiscal period, the balances of temporary accounts are summarized and transferred to the owner's capital account.
True
Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.
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
The balances of the expense accounts must be reduced to zero to prepare the accounts for the next 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
Temporary accounts begin each new fiscal period with a ____.
Zero Balance
The journal entry to close Income Summary when there is a net income is ____.
debit Income Summary; credit owner's capital
The journal entry to adjust Prepaid Insurance is ____.
debit Insurance Expense; credit Prepaid Insurance
The journal entry to close Sales is ____.
debit Sales; credit Income Summary
The journal entry to adjust Supplies is ____.
debit Supplies Expense; credit Supplies
The journal entry to close the drawing account is ____.
debit owner's capital account; credit owner's drawing account
The journal entry to close Income Summary when there is a net loss is ____.
debit owner's capital; credit Income Summary
When the revenue is greater than the total expenses, ____.
the income summary account has a credit balance
When the total expenses are greater than the total revenue, ____.
the income summary account has a debit balance
After the adjusting entry for Prepaid Insurance has been posted, Insurance Expense has an up-to-date balance, which is the ____.
value of insurance premiums used during the fiscal period
After the adjusting entry for Supplies has been posted, Supplies Expense has an up-to-date balance, which is the ____.
value of supplies used during the fiscal period