Closing Entries Quiz

What is the purpose of closing entries?

• To prepare financial statements

• To transfer temporary account balances to permanent accounts

• To calculate net income

• To record daily transactions

Which of the following is NOT a step in preparing closing entries?

• Creating a Post-closing Trial balance

• Creating a budget for the next period

• Posting the closing entries in the general ledger

• Preparing closing entries in the general journal

What does the income summary account do?

• Closes the owner's capital account

• Tracks cash flow

• Closes the income and expense accounts

• Records daily sales

What happens to the balances of temporary accounts after closing entries are made?

• They are carried forward to the next period

• They are reduced to zero

• They are transferred to the income statement

• They are ignored

What is the first step in the closing entries process?

• Preparing closing entries in the general journal

• Posting to the general ledger

• Calculating net income

• Creating a Post-closing Trial balance

If there is a net loss, which step is used to close the income summary account?

• Step 2

• Step 3

• Step 1

• Step 4

What is the final step after posting closing entries to the general ledger?

• Preparing the income statement

• Recording new transactions

• Creating a Post-closing Trial balance

• Calculating total revenue

Which account is closed to the owner's capital account?

• Expenses account

• Drawings account

• Income summary account

• Service revenue account

What is the result of closing the owner's drawings account?

• It has no effect on the owner's capital

• It transfers to the income summary

• It decreases the owner's capital

• It increases the owner's capital

What does a Post-closing Trial balance consist of?

• Only income and expense accounts

• Both temporary and permanent accounts

• Only permanent accounts

• Only temporary accounts