Accounting Chapter 8 Flashcards

Questions and Answers

Which accounting concept applies when a work sheet is prepared at the end of each fiscal cycle to summarize the general ledger information needed to prepare financial statements?

Full Disclosure

Going Concern

Business Entity

Accounting Period Cycle (correct)

The ending account balances of permanent accounts for one fiscal period are:

the same as the prior period's ending balance

equal to the capital account balance

all equal to zero

the beginning account balances for the next fiscal period (correct)

Which of the following accounts is a temporary account?

Clyde Sullivan, Capital

Rent Expense (correct)

Accounts Payable

Cash

Which accounting concept applies when expenses are reported in the same fiscal period that they are used to produce revenue?

Matching Expenses with Revenue Signup and view all the answers

When revenue is greater than total expenses, resulting in a net income, the Income Summary account has a:

credit balance Signup and view all the answers

Information needed for recording the closing entries is obtained from the:

work sheet's Income Statement and Balance Sheet columns Signup and view all the answers

Income Summary is:

a temporary account Signup and view all the answers

After the closing entries are posted, the Sales account balance should be:

zero Signup and view all the answers

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

on the balance sheet for the fiscal period Signup and view all the answers

The accounts listed on a post-closing trial balance are:

general ledger accounts with balances after the closing entries are posted Signup and view all the answers

Study Notes

Accounting Concepts

Accounting Period Cycle concept involves preparing a work sheet at each fiscal cycle's end to summarize general ledger information for financial statement preparation.
Matching Expenses with Revenue is the principle stating that expenses must be reported in the same fiscal period when the related revenue is generated.

Permanent and Temporary Accounts

Permanent account ending balances at the end of a fiscal period serve as the beginning balances for the subsequent period.
Temporary accounts such as Rent Expense accumulate balances over a fiscal period and reset to zero after closing entries.

Income Summary

The Income Summary account reflects a credit balance when revenues exceed total expenses, indicating net income.
It is classified as a temporary account, used solely for summarizing financial results during the closing process.

Closing Entries

Closing entries are recorded using information from the work sheet's Income Statement and Balance Sheet columns.
After posting closing entries, the Sales account balance resets to zero.

Owner's Capital Accounts

Owner's capital account balances post-closing should match the balances reported on the fiscal period's balance sheet.

Post-Closing Trial Balance

The post-closing trial balance includes general ledger accounts that maintain balances after closing entries have been completed.
It does not account for those with no balances after adjustments and closings.

Description

Test your knowledge of key accounting concepts from Chapter 8 with these flashcards. Each card focuses on essential terms and definitions that are critical for understanding financial statement preparation. Perfect for students looking to reinforce their learning in accounting.