Chapter 8 Review

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

Temporary accounts are also called nominal accounts.

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

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

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

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.

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

Income Summary is a(n)

• asset account.

• liability account.

• temporary account.

• permanent account.

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

The Income Summary account has a normal debit balance.