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Indicate whether the statement is true or false.
1. The Income Summary account has a normal debit balance.
a.
True
b.
False
2. Permanent accounts are used to accumulate information until it is transferred to the owner’s capital account.
a.
True
b.
False
3. To close a temporary account, an amount equal to its balance is recorded in the account on the side opposite to its
balance.
a.
True
b.
False
4. The series of accounting activities included in recording financial information for a fiscal period is called an accounting
cycle.
a.
True
b.
False
5. The balances of the liability accounts must be reduced to zero to prepare the accounts for the next period.
a.
True
b.
False
6. Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.
a.
True
b.
False
7. The drawing account is a permanent account.
a.
True
b.
False
8. Temporary accounts are also called nominal accounts.
a.
True
b.
False
9. 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.
a.
True
b.
False
10. Temporary accounts must start each fiscal period with a zero balance.
a.
True
b.
False
11. A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are
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posted.
a.
True
b.
False
12. The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the
next fiscal period.
a.
True
b.
False
13. At the end of a fiscal period, the balances of permanent accounts are summarized and transferred to the owner’s
capital account.
a.
True
b.
False
14. Temporary accounts include assets, expenses, and the owner’s drawing account.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
15. Income Summary is a(n)
a.
asset account.
b.
liability account.
c.
temporary account.
d.
permanent account.
16. The last step in the accounting cycle is to
a.
record transactions in a journal.
b.
prepare a work sheet.
c.
journalize and post closing entries.
d.
prepare a post-closing trial balance.
17. 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.
18. 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.
19. 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.
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.
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21. 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.
22. 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.
23. 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.
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