Accounting Chapter 8

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

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Temporary Accounts are also called nominal accounts.

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

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

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

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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.

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

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The Income Summary account has a normal debit balance.

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

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

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