Chapter 8 Objective Questions
True/False
Indicate whether the statement is true or false.
____
1. Preparing a work sheet at the end of each fiscal period to summarize the general ledger information needed to
prepare financial statements is an application of the accounting concept Accounting Period Cycle.
____
2. Adjustments are first analyzed and planned on a work sheet before the adjusting entries are journalized.
____
3. Adjusting entries are recorded on the next journal page following the page on which the last daily transactions
for the month are recorded.
____
4. A source document is prepared for adjusting entries.
____
5. Permanent accounts are also referred to as temporary accounts.
____
6. The ending account balances of permanent accounts for one fiscal period are the beginning account balances
for the next fiscal period.
____
7. At the end of a fiscal period, the balances of temporary accounts are summarized and transferred to the
owner's capital account.
____
8. Temporary accounts must start each fiscal period with a zero balance.
____
9. Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.
____ 10. To close a temporary account, an amount equal to its balance is recorded in the account on the side opposite
to its balance.
____ 11. The income summary account has a normal debit balance.
____ 12. Information needed to record closing entries is found in the Income Statement and Balance Sheet columns of
the work sheet.
____ 13. A source document is prepared for closing entries.
____ 14. The balances of the expense accounts must be reduced to zero to prepare the accounts for the next fiscal
period.
____ 15. The income summary account balance must be reduced to zero to prepare the account for the next fiscal
period.
____ 16. The drawing account is a permanent account.
____ 17. 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.
____ 18. A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing
entries are posted.
____ 19. All accounts in a general ledger are listed on a post-closing trial balance.
____ 20. Temporary accounts are not listed on a post-closing trial balance.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 21. Adjustments are analyzed and planned ____.
a. in the ledgers
c. on a work sheet
b. on the financial statements
d. none of the above
____ 22. The journal entry to adjust Supplies is ____.
a. debit Supplies; credit Supplies Expense
b. debit Supplies Expense; credit Supplies
c. debit Income Summary; credit Supplies
d. debit Supplies Expense; credit Income Summary
____ 23. After the adjusting entry for Supplies has been posted, Supplies Expense has an up-to-date balance, which is
the ____.
a. same as the beginning balance for Supplies
b. same as the ending balance for Supplies
c. value of supplies bought during the fiscal period
d. value of supplies used during the fiscal period
____ 24. The journal entry to adjust Prepaid Insurance is ____.
a. debit Prepaid Insurance; credit Insurance Expense
b. debit Insurance Expense; credit Prepaid Insurance
c. debit Income Summary; credit Prepaid Insurance
d. debit Insurance Expense; credit Income Summary
____ 25. After the adjusting entry for Prepaid Insurance has been posted, Insurance Expense has an up-to-date balance,
which is the ____.
a. same as the beginning balance for Prepaid Insurance
b. same as the ending balance for Prepaid Insurance
c. value of insurance premiums used during the fiscal period
d. value of insurance premiums bought during the fiscal period
____ 26. Accounts used to accumulate information from one fiscal period to the next are ____ accounts.
a. revenue
c. temporary
b. permanent
d. expense
____ 27. Accounts used to accumulate information until it is transferred to owner's capital accounts are ____ accounts.
a. asset
c. temporary
b. permanent
d. liability
____ 28. Temporary accounts begin each new fiscal period with a ____.
a. debit balance
c. zero balance
b. credit balance
d. balance equal to the net income
____ 29. When the revenue is greater than the total expenses, ____.
a. the income summary account has a credit balance
b. the income summary account has a debit balance
c. debits equal credits
d. none of the above
____ 30. When the total expenses are greater than the total revenue, ____.
a. the income summary account has a credit balance
b. the income summary account has a debit balance
c. debits equal credits
d. none of the above
____ 31. Information needed for closing entries is found in the ____.
a. Income Statement and Balance Sheet columns of the work sheet
b. Income Statement and Adjustments columns of the work sheet
c. Trial Balance and Adjustments columns of the work sheet
d. Trial Balance and Balance Sheet columns of the work sheet
____ 32. The journal entry to close Sales is ____.
a. debit Income Summary; credit Sales
b. debit Sales; credit Income Summary
c. debit Income Summary; credit owner's capital
d. none of the above
____ 33. The journal entry to close the expense accounts is ____.
a. debit Income Summary; credit owner's capital
b. debit Income Summary for the total expenses; credit each expense account
c. debit each expense account; credit Income Summary
d. none of the above
____ 34. The journal entry to close Income Summary when there is a net income is ____.
a. debit Sales; credit Income Summary
b. debit owner's capital; credit Income Summary
c. debit owner's capital account; credit Sales
d. debit Income Summary; credit owner's capital
____ 35. The journal entry to close Income Summary when there is a net loss is ____.
a. debit Sales; credit Income Summary
b. debit owner's capital; credit Income Summary
c. debit Income Summary; credit owner's capital
d. debit owner's capital account; credit Sales
____ 36. The journal entry to close the drawing account is ____.
a. debit Sales; credit Income Summary
b. debit owner's capital; credit Income Summary
c. debit Income Summary; credit owner's capital
d. debit owner's capital account; credit owner's drawing account
____ 37. After the closing entries are posted, the only accounts with balances are ____ accounts.
a. owner's equity
c. temporary
b. permanent
d. asset
____ 38. Which accounting concept applies when a work sheet is prepared at the end of each fiscal cycle to summarize
the general ledger information needed to prepare financial statements?
a. Business Entity
c. Adequate Disclosure
b. Accounting Period Cycle
d. Consistent Reporting
____ 39. Which accounting concept applies when financial statements are prepared from information on the work
sheet?
a. Objective Evidence
c. Accounting Period Cycle
b. Consistent Reporting
d. Adequate Disclosure
____ 40. Which accounting concept applies when expenses are reported in the same fiscal period that they are used to
produce revenue?
a. Business Entity
c. Matching Expenses with Revenue
b. Going Concern
d. Adequate Disclosure
____ 41. Information needed for journalizing the adjusting entries is obtained from the ____.
a. general ledger account Balance columns
b. income statement
c. work sheet's Adjustments columns
d. balance sheet
____ 42. Information needed for recording the closing entries is obtained from the ____.
a. general ledger accounts' Debit Balance columns
b. work sheet's Income Statement and Balance Sheet columns
c. balance sheet
____ 43.
____ 44.
____ 45.
____ 46.
____ 47.
____ 48.
____ 49.
____ 50.
d. income statement
Income summary is ____.
a. an asset account
c. a temporary account
b. a liability account
d. a permanent account
Information needed to journalize a closing entry for revenue is obtained from the ____.
a. work sheet's Income Statement Credit column
b. work sheet's Income Statement Debit column
c. work sheet's Adjustments Debit column
d. work sheet's Adjustments Credit column
Information needed to journalize a closing entry for expenses is obtained from the ____.
a. work sheet's Income Statement Credit column
b. work sheet's Income Statement Debit column
c. work sheet's Adjustments Debit column
d. work sheet's Adjustments Credit column
Information needed to journalize a closing entry for the income summary account is obtained from ____.
a. the general ledger accounts
b. a work sheet's net income or net loss line
c. an income statement
d. a balance sheet
Information needed to journalize a closing entry for the owner's drawing account is obtained from the ____.
a. work sheet's Balance Sheet Debit column
b. work sheet's Balance Sheet Credit column
c. income statement
d. work sheet's Income Statement Debit column
After the closing entries are posted, the owner's capital account balance should be the same as shown ____.
a. on the balance sheet for the fiscal period
b. in the work sheet's Balance Sheet Debit column
c. in the work sheet's Balance Sheet Credit column
d. in the work sheet's Income Statement Debit column
The accounts listed on a post-closing trial balance are ____.
a. those that have balances after the closing entries are posted
b. all general ledger accounts
c. those that have no balances after adjusting and closing entries
d. those that appear in the work sheet's Trial Balance columns
The last step in the accounting cycle is ____.
a. to journalize and post the closing entries
b. to prepare a work sheet and financial statements
c. to analyze transactions and journalize and post them
d. none of the above
Chapter 8 Objective Questions
Answer Section
TRUE/FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
T
T
T
F
F
T
T
T
T
T
F
T
F
T
T
F
T
T
F
T
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
MULTIPLE CHOICE
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
C
B
D
B
C
B
C
C
A
B
A
B
B
D
B
D
B
B
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
D
C
C
B
C
A
B
B
A
A
A
D
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1