Ch. 8 Accounting Closing Entries

Front

What are permanent accounts in accounting?

Back

Permanent accounts are accounts that maintain their balances over multiple accounting periods. They include assets, liabilities, and equity accounts.

Front

What happens to the ending balances of permanent accounts at the end of a fiscal period?

Back

The ending account balances for permanent accounts become the beginning balances for the next fiscal period.

Front

What is the starting balance for temporary accounts at the beginning of a new fiscal period?

Back

Temporary accounts begin each new fiscal period with a zero balance.

Front

What is the purpose of the Income Summary account during closing entries?

Back

The Income Summary account is used to summarize the revenues and expenses for the period and must be reduced to zero to prepare for the next fiscal period.

Front

Where can information needed for closing entries be found?

Back

Information needed for closing entries is found in the Income Statement and Balance Sheet columns on the worksheet.

Front

What are temporary accounts?

Back

Temporary accounts are accounts that track financial results for a specific period and are reset to zero at the beginning of the next period.

Front

Why is it important to close temporary accounts?

Back

Closing temporary accounts is important to ensure that the financial results of one period do not carry over into the next period.

Front

What is the effect of closing entries on the Income Summary account?

Back

Closing entries reduce the Income Summary account to zero, reflecting that all revenues and expenses have been transferred to the retained earnings.

Front

What types of accounts are typically considered temporary accounts?

Back

Temporary accounts typically include revenue accounts, expense accounts, and dividends.

Front

What is the relationship between the Income Summary account and retained earnings?

Back

The balance in the Income Summary account is transferred to retained earnings at the end of the accounting period.