"COMPLETING THE ACCOUNTING CYCLE"|ACC 211 - CHAPTER 4|WITH CORRECT ANSWERS |GRADED A

Closing Entries Correct Answer Are a series of 4 entries made at the end of a company's fiscal year to set the balances in all the temporary (nominal) accounts to zero and to transfer the year's new income or loss to the owner's capital account. Temporary Accounts Correct Answer Also known as Nominal Accounts; include all Income Statement accounts (Revenues/Expenses) & the Owner's Drawing Account. They are closed out at the end of the accounting period by setting their balances to zero. These Temporary accounts can start accumulating data for the new fiscal year and do not carry any balance over from the prior year. Permanent Accounts Correct Answer Also known as Real Accounts; (Balance Sheet Accounts - Assets, Liability, & the Owner's Capital). Carry their balances over to the next accounting period. These real accounts are not closed out. The balances in Permanent accounts tend to fluctuate - sometimes increasing, sometimes decreasing. Income Summary Correct Answer is a temporary clearing account used only in the closing process. The balances of the revenue & expense accounts are transferred to this account and its balance (the firm's new income or loss) is then transferred in to the owner's capital account Post Closing Trial Balance Correct Answer is a list of the Permanent (Real) & their balances after the closing entries have been journalized and posted to the ledger accounts. No Revenue or Expense accounts will appear on this proof that Total Debits = Total Credits because they were closed out.