Chapter 8 Review

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

• True
• False

Temporary accounts are also called nominal accounts.

• True 
• False

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

• True
• False

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

• True
• False

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

• True
• False

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.

• True
• False

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

• True
• False

The Income Summary account has a normal debit balance.

• True
• False

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

• True
• False

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

• True
• False