True/False
Indicate whether the sentence or statement is true
or false.
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1.
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After
closing entries are posted, the revenue and expense accounts will have zero balances.
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2.
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One
of the purposes of closing entries is to transfer net income or net loss for the period to the
Capital account.
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3.
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Before the Income Summary account is closed, its balance represents the net income or
net loss for the accounting period.
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4.
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The
Capital account is closed at the end of each accounting period.
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5.
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The
entry to close the revenue account Fees Income requires a debit to that account.
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6.
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The
entry to close an expense account requires a credit to the Income Summary account.
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7.
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At
the end of each accounting period, asset and liability account balances are reduced to
zero.
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8.
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A
postclosing trial balance will not contain revenue and expense account balances.
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9.
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Adjusting entries must be journalized and posted before the closing entries are
journalized and posted.
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10.
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The
Income Summary account is a temporary owner's equity account.
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11.
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The
balance of the owner's Drawing account will appear on the postclosing trial balance.
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12.
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The
Income Summary account is used only at the end of an accounting period to help with the closing
procedure.
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13.
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The
entry to transfer a net income to the Capital account would include a debit to Capital.
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14.
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Withdrawals by the owner for personal use do not affect net income or net loss of the
business.
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15.
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The
temporary equity accounts are closed because they apply to only one accounting period.
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16.
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The
postclosing trial balance contains permanent balance sheet accounts only.
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17.
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The
heading "Closing Entries" is usually written in the Description column of the general
journal above the first closing entry.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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18.
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One
purpose of closing entries is to give zero balances to a. | asset and
liability accounts. | c. | revenue and
expense accounts. | b. | liability and capital accounts. | d. | expense and capital accounts. | | | | |
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19.
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After
the closing entries are posted to the ledger, each expense account will have a. | a debit
balance. | c. | either a debit
or a credit balance. | b. | a credit balance. | d. | a zero balance. | | | | |
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20.
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The
entry to close the Income Summary account may include a. | a debit to
Income Summary and a credit to Capital. | b. | a debit to Income Summary and a credit to
Cash. | c. | a debit to Cash and a credit to Income
Summary. | d. | a debit to the owner's Drawing account and a credit to Income
Summary. | | |
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21.
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One
purpose of closing entries is to a. | transfer the results of operations to owner's
equity. | b. | reduce the Capital account balance to zero so that the account
is ready to receive data for the next period. | c. | adjust the
ledger account balances to provide complete and accurate figures for use on financial
statements. | d. | close all accounts so that the ledger is ready for the next
accounting period. | | |
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22.
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The
entry to transfer a net loss to the Capital account would include a. | a debit to
Capital and a credit to Cash. | b. | a debit to Drawing and a credit to
Capital. | c. | a debit to Income Summary and a credit to
Capital. | d. | a debit to Capital and a credit to Income
Summary. | | |
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23.
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The
revenue account Fees Income is closed by a. | debiting Cash and crediting Fees
Income. | b. | debiting Fees Income and crediting Income
Summary. | c. | debiting Capital and crediting Fees
Income. | d. | debiting Income Summary and crediting Fees
Income. | | |
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24.
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The
Drawing account is closed by a. | debiting Drawing and crediting
Capital. | b. | debiting Capital and crediting
Drawing. | c. | debiting Income Summary and crediting
Drawing. | d. | debiting Drawing and crediting Income
Summary. | | |
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25.
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After
the worksheet had been completed, the next step in the accounting cycle is to a. | journalize and
post the closing entries. | c. | prepare the
postclosing trial balance. | b. | journalize and post the adjusting
entries. | d. | prepare the
financial statements. | | | | |
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Matching
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Indicate whether the next 10 accounts are "temporary" or
"permanent" accounts. a. | Temporary account | b. | Permanent account | | | | |
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26.
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Cash
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27.
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Salaries Expense
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28.
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Drawing
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29.
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Fees
Earned
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30.
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Supplies
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31.
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Supplies Expense
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32.
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Income Summary
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33.
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Accumulated Depreciation
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34.
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Depreciation Expense
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35.
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Accounts Payable
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Indicate which of the following ten accounts WOULD appear in a Post-closing
Trial Balance.
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36.
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Prepaid Insurance
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37.
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Buildings
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38.
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Drawing
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39.
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Capital
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40.
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Fares
Earned
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41.
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Depreciation Expense
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42.
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Notes
Payable
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43.
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Rent
Expense
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44.
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Prepaid Rent
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45.
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Income Summary
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