1. 5.1 Explain what is meant by the term real accounts (also known as permanent accounts).
2. 5.1 Explain what is meant by the term nominal accounts (also known as temporary accounts).
3. 5.1 What is the purpose of the closing entries?
4. 5.1 What would happen if the company failed to make closing entries at the end of the year?
5. 5.1 Which of these account types (Assets, Liabilities, Equity, Revenue, Expense, Dividend) are credited in
the closing entries? Why?
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6. 5.1 Which of these account types (Assets, Liabilities, Equity, Revenue, Expense, Dividend) are debited in
the closing entries? Why?
7. 5.1 The account called Income Summary is often used in the closing entries. Explain this account’s
purpose and how it is used.
8. 5.1 What are the four entries required for closing, assuming that the Income Summary account is used?
9. 5.1 After the first two closing entries are made, Income Summary has a credit balance of $125,500. What
does this indicate about the company’s net income or loss?
10. 5.1 After the first two closing entries are made, Income Summary has a debit balance of $22,750. What
does this indicate about the company’s net income or loss?
11. 5.2 What account types are included in a post-closing trial balance?
12. 5.2 Which of the basic financial statements can be directly tied to the post-closing trial balance? Why is
this so?
13. 5.3 Describe the calculation required to compute working capital. Explain the significance.
14. 5.3 Describe the calculation required to compute the current ratio. Explain the significance.
15. 5.4 Describe the progression of the three trial balances that a company would have during the period,
and explain the difference between the three.