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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?
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?
The ending account balances of permanent accounts for one fiscal period are:
The ending account balances of permanent accounts for one fiscal period are:
Which of the following accounts is a temporary account?
Which of the following accounts is a temporary account?
Which accounting concept applies when expenses are reported in the same fiscal period that they are used to produce revenue?
Which accounting concept applies when expenses are reported in the same fiscal period that they are used to produce revenue?
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When revenue is greater than total expenses, resulting in a net income, the Income Summary account has a:
When revenue is greater than total expenses, resulting in a net income, the Income Summary account has a:
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Information needed for recording the closing entries is obtained from the:
Information needed for recording the closing entries is obtained from the:
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Income Summary is:
Income Summary is:
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After the closing entries are posted, the Sales account balance should be:
After the closing entries are posted, the Sales account balance should be:
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After the closing entries are posted, the owner's capital account balances should be the same as shown:
After the closing entries are posted, the owner's capital account balances should be the same as shown:
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The accounts listed on a post-closing trial balance are:
The accounts listed on a post-closing trial balance are:
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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.
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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.
