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Income Summary Account is a Temporary Account only used for the closing process is "True", as it is used to close Temporary Accounts ( Revenues & Expenses ). During the closing process of temporary accounts, the purpose of income summary account is to close all temporary accounts at the end of the accounting period. So, it is a summary of revenues and expenses to show the difference between revenues and expenses to get Income or Loss for the period and such income or loss must be equal to the income or loss of Income Statement. After preparing income summary account, the balances of temporary account are zero out while the balances of permanent accounts (Assets, Liabilities and Equity) are transferred to post-closing trial balance in order to carry forward the balances of these accounts to the next accounting period. Moreover, after closing the revenues and expenses to the Income Summary Account, the income summary account is also closed to the Retained Earning...

An important purpose / objective of Closing Entries is to set Nominal Account or Temporary Account balances to zero out in order to start or begin the next accounting period. It is the correct choice or option of this multiple choice question (mcq). So, an important purpose of closing entries is to set Permanent Account balances to zero is not true i.e., answer of this question is " False ", as permanent account balances are transferred to the next year’s financial statements. These accounts are only closed when the business is closed down i.e., it goes into liquidation process or winding up process as the business suffered heavy losses during the previous accounting periods.

Adjusting Journal Entries must be Journalized and Posted before Financial Statements are prepared so that the account balances show the correct, true and updated figures in financial statements, in which users of accounting information are interested to take economic decisions. This step is necessary to reflect true & accurate accounting information for those accounts that require adjustments.  Accounts that require adjusting entries are prepaid expense accounts, accrued expense accounts, accrued revenues, unearned revenues, depreciation, allowance for doubtful accounts, etc. Adjusting entries include atleast one Income Statement Account and one Balance Sheet Account to reflect the correct, true and upto date balances of accounts.

Closing Entries must be Journalized and Posted after Financial Statements are prepared so that Post-Closing Trial Balance is prepared to calculate the balances of all Permanent Accounts which are Balance Sheet Accounts. These kinds of accounts include assets, liabilities and equity. All the  Temporary Accounts ,  which are Income Statement Accounts, are closed at the at end of the accounting period. So, no temporary accounts come in Post-Closing Trial Balance after the closing entries are journalized and posted to the Ledger.feed

If the debit portion of an Adjusting Entry is to an Asset Account , then the credit portion must be a Liability is false as when we debit a Prepaid Expense Account or an Accrued Revenue Account as a Current Asset , then we credit an Expense Account or a Revenue Account . The following adjusting entries in which the debit portion shows a Prepaid Expense Account or an Accrued Revenue Account and credit portion shows an Expense Account or a Revenue Account are shown below: 1.                                   Prepaid Expense a/c  XXX                                                                                Expense a/c XXX                   ...