1. Accounting 11
Chapter 8 Review

2. If nominal accounts are not closed out at the end of a fiscal period, how does this affect account data for the following fiscal period? Provide an example.

3. Answer
It would cause the account balances to be inaccurate. For example the income statement would be overstated if there was a net income Revenue and Expense accounts were not closed out.

4. What are adjusting and closing entires dated as on the journal?

5. Answer
They are dated at the end of the fiscal period. NOTE: this is not necessarily December 31.

6. What type of accounts are current assets?

7. Answer
Any short term assets that are used up or turned into cash within one year.

8. The revenue account needs to be ____________ at the end of the fiscal year in order to be closed out.

9. Answer
DEBITED

10. Which accounting standard states that accounting should be done in equal periods of time?

11. Answer
Time Period Concept

12. What is the temporary equity account used only during the closing process?

13. Answer
Income Summary Account

14. Which method of depreciation is preferred by the Canada Revenue Agency?

15. Answer
Declining balance method

16. What is the equation for calculating straight-line depreciation?

17. Answer
Purchase price - salvage value
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# of periods used

18. Depreciation is recorded in which account on the income statement?

19. Answer
Depreciation expense

20. What are the nominal accounts?

21. Answer
Revenue
Expenses
Drawings

22. Last minute changes that need to be made at the end of the fiscal period are known as…

23. Answer
Adjusting entries

24. What is the 50% Rule?

25. Answer
This allows half of a businsses’ asset cost to be eligible for depreciation in the first year of use, regardless of which month it was purchased.

26. What is accrual accounting?

27. Answer
Accrual accounting attempts to record revenues and expenses when they happen, regardless of whether cash is received of paid.

28. Define prepaid expense.

29. Answer
An expense, other than for inventory, with benefits that extend into the future, paid for in advance.

30. Name the order in which accounts are closed in the closing process.

31. Answer
Revenue
Expenses
Income
Drawings