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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Permanent accounts are also referred to as temporary accounts.

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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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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 the 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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At the end of a fiscal period, the balances of permanent 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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