AMA201_Questions_Chapter_3 - Jesica Islas Intermediate...

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Jesica Islas Intermediate Accounting 1 January 23, 2007 Professor A. Wu Chapter 3 Questions on Chapter 3 4. – Why are revenue and expense accounts called temporary or nominal accounts? Revenue and expense accounts are referred to as temporary or nominal accounts because each period they are closed out to Income Summary in the closing process. Their balances are reduced to zero at the end of the accounting period; therefore, the term temporary or nominal is sometimes given to these accounts. 6. – Is it necessary that a trial balance be taken periodically? What purpose does it serve? Although it is not absolutely necessary that a trial balance be taken periodically, it is customary and desirable. The trial balance accomplishes two principal purposes: 1. It tests the accuracy of the entries in that it proves that debits and credits of an equal amount are in the ledger. 2. It provides a list of ledger accounts and their balances which may be used in preparing the financial statements and in supplying financial data about the concern.
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AMA201_Questions_Chapter_3 - Jesica Islas Intermediate...

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