Deck 8: Closing Entries and Post-Closing

Question 1

Temporary accounts include assets, expenses, and the owner's drawing account.

Answer 1

False

Question 2

Temporary accounts are also called nominal accounts.

Answer 2

True

Question 3

Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.

Answer 3

True

Question 4

The balances of the liability accounts must be reduced to zero to prepare the accounts for the next period.

Question 5

Permanent accounts are used to accumulate information until it is transferred to the owner's capital account.

Question 6

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.

Question 7

The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period.

Question 8

The Income Summary account has a normal debit balance.

Question 9

To close a temporary account, an amount equal to its balance is recorded in the account on the side opposite to its balance.

Question 10

The series of accounting activities included in recording financial information for a fiscal period is called an accounting cycle.

Question 11

The drawing account is a permanent account.

Question 12

Temporary accounts must start each fiscal period with a zero balance.

Question 13

At the end of a fiscal period, the balances of permanent accounts are summarized and transferred to the owner's capital account.

Question 14

The accounts that appear on the post-closing trial balance are

A) assets, liabilities, and owner's capital.
B) revenue, expenses, and owner's drawing.
C) all accounts in the chart of accounts.
D) all temporary accounts.

Question 15

Income Summary is a(n)

A) asset account.
B) liability account.
C) temporary account.
D) permanent account.

Question 16

When the total expenses are greater than the total revenues,

A) the Income Summary account has a credit balance.
B) the Income Summary account has a debit balance.
C) debits equal credits.
D) none of these.

Question 17

Accounts used to accumulate information from one fiscal period to the next are

A) revenue accounts.
B) permanent accounts.
C) temporary accounts.
D) expense accounts.

Question 18

After the closing entries are posted, the owner's capital account balance should be the same as shown

A) on the balance sheet for the fiscal period.
B) in the work sheet's Balance Sheet Debit column.
C) in the work sheet's Balance Sheet Credit column.
D) in the work sheet's Income Statement Debit column.

Question 19

After closing entries are posted, the balance in the owner's drawing account should be

A) a debit.
B) zero.
C) a credit.
D) none of these.

Question 20

Temporary accounts begin each new fiscal period with a

A) debit balance.
B) credit balance.
C) zero balance.
D) balance equal to the net income.

Question 21

The journal entry to close Income Summary when there is a net income is

A) debit Sales; credit Income Summary.
B) debit owner's capital; credit Income Summary.
C) debit owner's capital; credit Sales.
D) debit Income Summary; credit owner's capital.