Chapter 5 - College Accounting: A Practical Approach

Question 1

What is another name for a permanent account?

Answer 1

A real account

Question 2

What is an example of a permanent account?

Answer 2

Assets, Liabilities and capital

Question 3

What is the main character trait of a permanent / real account?

Answer 3

They carry year to year

Question 4

What is another name for a temporary account?

Answer 4

Nominal

Question 5

What are some examples of Temporary accounts?

Answer 5

Withdrawals, revenues & expense accounts

Question 6

What is the main character trait of a temporary / nominal account?

Answer 6

Account balances do not carry forward / zero out at the beginning of each accounting period

Question 7

What is the main purpose of closing entries?

Answer 7

To zero out all the temporary accounts for the beginning of the next accounting period

Question 8

What is the closing entry acronym?

Answer 8

REID

Question 9

What does REID stand for?

Answer 9

Revenue, Expenses, Income Summary, Drawings

Question 10

How many steps to the closing process are there?

Answer 10

4 steps

Question 11

What is the first step of the closing entries?

Answer 11

Clear revenue to income summary

Question 12

What is the second step of the closing entries?

Answer 12

Clear expenses to the income summary

Question 13

What is the third step of the closing entries?

Answer 13

Clear balance of the income summary to capital account

Question 14

What is the final step of the closing entries?

Answer 14

Clearing the withdrawals to the capital account

Question 15

Is the income summary temporary or permanent?

Answer 15

Temporary

Question 16

How do you clear the revenue balance to the income summary?

Answer 16

Debit revenue and credit income summary

Question 17

How do you clear the expenses to the income summary?

Answer 17

Credit the expense and debit income summary

Question 18

What comes first in a journal entry, debits or credits?

Answer 18

Debits

Question 19

How do you clear the balance of the income summary if there is a net income?

Answer 19

Debit income summary and credit capital

Question 20

How do you clear the income summary if there is a net loss?

Answer 20

Credit income summary and debit capital

Question 21

How do you clear the balance of the withdrawals account to the capital account?

Answer 21

Credit withdrawals and debit the capital account

Question 22

Why is the withdrawals not transferred to the income summary?

Answer 22

Because it is not relevant to business activity

Question 23

What is the last step in the accounting cycle?

Answer 23

Post closing trial balance

Question 24

What is the purpose of a post closing trial balance?

Answer 24

Aids in ensuring accuracy of the adjustments and closing entries / process

Question 25

What accounts are listed on the post closing trial balance?

Answer 25

Permanent accounts

Question 26

What is another name for the post closing trial balance?

Answer 26

Opening trial balance

Question 27

What is an important number that is listed on the post closing trial balance?

Answer 27

True ending figure for capital