Accounting Chapter 8 Quiz and Flashcards

Questions and Answers

What are permanent accounts?

Accounts used to transfer information to capital accounts

Accounts that summarize temporary accounts

Accounts used to accumulate information from one fiscal period to the next (correct)

Accounts with no balances at the end of the fiscal period

What are temporary accounts used for?

Accumulating information for an indefinite period

Tracking capital contributions

Accumulate information until it is transferred to the owner's capital account (correct)

Monitoring fixed assets

What are closing entries?

Entries that adjust permanent accounts

Accounts that summarize income

Journal entries used to prepare temporary accounts for a new fiscal period (correct)

Entries used to finalize year-end accounts

What is a post-closing trial balance?

A trial balance prepared after the closing entries are posted Signup and view all the answers

What does the accounting cycle consist of?

Recording financial information for a fiscal period Signup and view all the answers

The closing entry for sales involves a debit to _____ and a credit to income summary.

sales Signup and view all the answers

The closing entry for all expense accounts involves a debit to income summary (total of expenses) and a credit to each individual _____ account.

expense Signup and view all the answers

When there is a net income, the income summary account will have a _____ balance.

credit Signup and view all the answers

What is needed to record the closing entries?

Work sheet's income statement and balance sheet columns Signup and view all the answers

The income summary is a permanent account.

False Signup and view all the answers

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

Zero Signup and view all the answers

What do the ending account balances of permanent accounts for one fiscal period represent?

The beginning account balances for the next fiscal period Signup and view all the answers

Rent expense is an example of a temporary account.

True Signup and view all the answers

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

What happens to the owner's capital account after closing entries?

It reflects the net income for the 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

How many steps are there in the accounting cycle?

8 Signup and view all the answers

Study Notes

Accounting Concepts

Permanent Accounts: Accounts that carry balances over to the next fiscal period.
Temporary Accounts: Accumulate balances until transferred to the owner's capital account, resetting after each period.
Closing Entries: Journal entries that prepare temporary accounts for a new fiscal period by resetting their balances.

Trial Balances

Post-Closing Trial Balance: A trial balance prepared after closing entries, ensuring that debits equal credits post-closing.

Accounting Cycle Components

Accounting Cycle: A systematic series of accounting activities for recording financial transactions within a fiscal period.
Source Documents: Original records that verify and provide details for transactions, ensuring accuracy during recording.

Closing Process

Closing Entry for Sales: Debits sales and credits income summary to close sales accounts.
Closing Entry for Expenses: Debits income summary for total expenses, credits individual expense accounts to zero them out.
Closing Entry for Income Summary (Net Income): Debits income summary and credits capital account to transfer net income.
Closing Entry for Income Summary (Net Loss): Debits capital account and credits income summary in case of a net loss.
Closing Entry for Drawing Account: Debits capital and credits the drawing account to record withdrawals.

Account Balances

Ending Balances of Permanent Accounts: These balances become the starting balances for the next fiscal period.
Sales Account Balance Post-Closing: Should be reset to zero after closing entries are posted.
Owner's Capital Account Balance Post-Closing: Should match the balance sheet figures at the end of the fiscal period.

Financial Reporting

Financial Statements Preparation: Derived from the worksheet, summarizing data for the income statement and balance sheet.

Key Entries and Their Balances

Income Summary as Temporary Account: Used to gather information before finalizing capital accounts during the closing process.
Credit Balance in Income Summary: Indicates that revenues exceeded expenses, resulting in net income.

Accounting Principles

Matching Expenses with Revenue: Ensures that expenses are recorded in the same period they help generate revenue, aligning costs with income for accurate financial reporting.

Work Sheet Process

Worksheet Elements: Includes trial balances and financial statement columns, crucial for summarizing ledger information necessary for financial statement preparation.

Final Steps in the Accounting Cycle

Post-Closing Trial Balance: Lists all general ledger accounts with balances after closing entries, confirming the accounting records are in order.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This study guide covers key terms from Accounting Chapter 8, focusing on permanent and temporary accounts, as well as closing entries. Each term is defined to enhance understanding and retention for effective learning. Use these flashcards to prepare for assessments on this chapter.