Recording Adjusting and Closing Entries (A) - Chapter 9

Preparing a work sheet at the end of each fiscal period to summarize the general ledger information needed to prepare financial statements is an application of the accounting concept Accounting Period Cycle.

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A source document is prepared for adjusting entries.

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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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At the end of a fiscal period, the balances of temporary accounts are summarized and transferred to the owner's capital account.

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Temporary accounts must start each fiscal period with a zero balance.

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

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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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The income summary account has a normal debit balance.

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

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The drawing account is a permanent account.

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