Accounting Chapter 16

General ledger account balances are changed only by posting journal entries.

Information needed for journalizing adjusting entries is taken from the income statement and balance sheet columns of a work sheet.

After all closing entries are posted, the temporary accounts have zero balances.

A corporation having a net loss would record a credit to income summary to close the account.

The income summary account is closed into Retained Earnings.

Expense accounts are closed by debiting the expense accounts and crediting Income Summary.

Revenue accounts are transferred to the credit side of the income summary account.

A prepaid insurance adjustment includes a debit to Insurance Expense and a credit to Prepaid Insurance.

Adjusting entries bring subsidiary ledger accounts up to date.

All general accounts that have balances are listed on a post-closing trial balance.

The dividends account is a temporary account and must begin each fiscal period with a debit balance.

The balance of the dividends account is closed to Retained Earnings.

The entry to close Income Summary transfers the amount of net income or net loss to the capital stock account.

The amount of the journal entry to close the income summary account can be obtained from the statement of stockholders' equity.

Amounts needed for the closing entries are obtained from the Trial Balance columns of a work sheet.

Income Summary is a temporary account and is used only at the beginning of a fiscal period.

At the end of a fiscal period, the temporary accounts are closed to prepare the general ledger for the next fiscal period.

Information needed for journalizing closing entries is taken from the Adjustment columns of a work sheet.