Chapter 8 Review

Front

What is the primary purpose of closing entries in accounting?

Back

To transfer balances from temporary accounts to permanent accounts

Front

Which of the following accounts is considered a temporary account? Cash, Accounts Receivable, Sales, Owner's Capital

Back

Sales

Front

What is the first step in the closing entries process?

Back

Close the revenue accounts

Front

Which account is used to summarize the revenues and expenses during the closing process?

Back

Income Summary

Front

How does the post-closing trial balance differ from the adjusted trial balance?

Back

It includes only permanent accounts.

Front

What is the effect of closing entries on the owner's equity when there is net income?

Back

It increases owner's equity

Front

Which of the following is a permanent account? Rent Expense, Sales, Owner's Capital, Supplies Expense

Back

Owner's Capital

Front

What is the purpose of a post-closing trial balance?

Back

To verify that debits equal credits after closing entries

Front

Which entry is made to close the income summary account if it has a credit balance? Options: Debit Income Summary; Credit Owner's Capital, Debit Owner's Capital; Credit Income Summary, Debit Income Summary; Credit Expenses, Debit Revenues; Credit Income Summary

Back

Debit Income Summary; Credit Owner's Capital

Front

How are owner's drawings closed at the end of the accounting period?

Back

Debit Owner's Capital; Credit Owner's Drawings