Accounting 1: Chapter 8 - Review

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

Temporary accounts are also called nominal accounts.

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

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

The drawing account is a temporary account.

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

The Income Summary account has a normal credit balance.

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

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.

Temporary accounts include liabilities, expenses, and the owner’s drawing account.

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

A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are posted.

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

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

The drawing account is a permanent account.