which of the following statements about closing entries is true

Should the Sales Returns and Allowances account be closed at year-end? Prepaid Insurance Accounts receivable 1,200 | Consulting revenue |2,500 Borrowers total debits (charges) subtracted from the sellers total credits B. Service revenue = $25,000 b. List of Excel Shortcuts Which of the following statements about the closing process is correct? Categorize the following account as temporary or permanent: Contributed Capital. Total revenues for the period are $60,200, total expenses are $42,300, and withdrawals are $11,000. Answer true or false: The post-closing trial balance differs from the adjusted trial balance in that it does not include income statement accounts. Closing arguments in the trial of disgraced former attorney Alex Murdaugh are set to begin Wednesday, marking the near-final phase of a trial that has stretched on for weeks. Accounts Receivable On the right side of the Cash T-account. In other words, the temporary accounts are closed or reset at the end of the year. What is the Retained Earnings account balance that will be included on the post-closing trial balance? During the year, Croc had a net loss of $30,000 and owner drawings of $15,000. What is the difference between Allowance for Doubtful Accounts and Bad Debt Expense? Explanation Which of the following could be an explanation for this transaction? The ledger of Swann Company contains the following balances: Retained Earnings $30,000; Dividends $2,000; Service Revenue $50,000; Salaries Expense $27,000; and Supplies Expense $4,000. It ignores the beginning balances of accounts. Create an account to browse all assetstoday. Revenue | 7,500 Crediting an asset (Cash) instead of crediting a liability (Interest Payable) would understate total assets and understate total liabilities. Fitzpatrick Company had $500 of accrued salary expenses that will be paid during the following accounting period. A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly or annually. Accounts Payable 4) Rent Expense. Prepare the An example of a permanent difference is: a. proceeds from life insurance on officers. Supplies expense. A credit to Dividends The December 28, 2016 income statement of Snap-On Incorporated includes the amounts shown below. Closing entries are required at the end of each accounting period to close all ledger accounts. Benson Co. purchased land and paid the full purchase price in cash. Assume a company has a net income that exceeds the owner's drawing for the current year. Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. The income summary account is also known as the clearing account. copyright 2003-2023 Homework.Study.com. How do you close the expense accounts? Operating Expenses |15,500 The following selected transactions were completed by Alcor Co., a supplier of Velcro for clothing: 2009 Dec. 13. ; income tax expense $35,100; and dividends $18,900. Salaries Expense 500 | Revenue | 7,500 Which of the following journal entries correctly records this transaction? The balance sheet will report retained earnings of $32,000 after the closing entries have been posted to the ledger accounts. Select the best answer the multiple-choice question below. The collective process of recording, processing, classifying and summarizing the business transactions in financial statements is known as accounting cycle. The entry to close the owner's drawing account would include a debit to the: a. owner's capital account and a credit to the owner's drawing account. A. No dividends were paid. What is the entry to close the Income Summary account? Accounts Payable c. Service Revenue d. Accumulated Depreciation. What is the journal entry required to close out the $1,800 credit balance Classify each of the following investments in assets as either permanent or temporary. True or false? Explanation Determine whether the following account has temporary balance: Retained Earnings. Early in the year Bill Sharnes and several friends organized a corporation called Sharnes Communications, Inc. Rent Expense. Accruing salary expenses will increase Salaries Expense and increase Salaries Payable, a liability. The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. Cash 1,300 | Is the Income Summary a temporary or permanent account? b. Closing Entries Questions and Answers. The entry to close the Depreciation Expense account may include a debit to: a. the Income Summary account and a credit to the Depreciation Expense account. A. (a) True (b) False. The closing of expense accounts results in a debit to Income Summary. Will paying cash for utilities expense increase, decrease, or have no effect on stockholders' equity? a. a. the drawing account b. Which of the following accounts will be closed by debiting the income summary account? The F. Mercury, Capital account has a credit balance of $42,000 before closing entries are made. Prepaid Rent, $900; Rent Expense, $300. The final closing entry to be journalized is typically the entry that closes the: a. revenue accounts b. owner's drawing account c. owner's capital account d. expense account, Which account types have a normal debit balance? c) liability account. Question: 1. Debits increase asset accounts; credits decrease asset accounts. Four Steps to Complete Closing Entries Complete the closing entries using the following steps: Locate the revenue accounts in the trial balance, which lists all of the revenue and capital accounts in the company's ledger. Mikaela Mundt invested $2,000 of her own money in her business. Should the Retained Earnings account be closed at year-end? no entry is required until the employee is paid next period. Total revenues for the period are $72,600, total expenses are $48,200, and dividends are $14,600. The capital account c. the cash account d. the income summary account. Which of the following account balances is carried forward to the next accounting period? Access the answers to hundreds of Closing entries questions that are explained in a way that's easy for you to understand. B) An asset account. If so, does the closing entry require a debit or a credit to the account? Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. During the current year, the partnership net income was $40,000. Accumulated Depreciation c. Drawing d. Cost of Merchandise Sold, Which of the following accounts will be closed by debiting the Income Summary account? Using the weighted-average method, what are the equivalent units of production for the month of July? Step-by-step explanation. On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. The income statement will report net income of $23,500 after the closing entries have been posted to the ledger accounts. Revenue accounts temporarily substitute for the credit side of the owner's capital account. The following is the adjusted trial balance for ABC Company. C. Revenues and expenses are closed to the Income Summary account. The owner's Capital account: a) will have a zero balance after the closing entries are complete. A credit to Dividends The more he talked, the a. Journalize the closing entries at April 30. b. a. Multiple Choice Side Kicks has year-end account balances of Sales Revenue $834,710; Interest Revenue $18,600; Cost of Goods Sold $583,930; Administrative Expenses $186,150; Income Tax Expense $32,990; and Dividend At the end of its first year of operation, Dade Corporation has $1,000,000 of common stock and a net income of $216,000. Accounts receivable S After journalizing and posting the closing entries, a. balance sheet accounts have zero balances. a) Revenues, Expenses, and Capital b) Revenues, Expenses, and Withdrawals c) Assets, Liabilities, and Capital d) Assets, Liabilities, and With During the closing process, revenue and expense account balances are first transferred to an account entitled: a) revenue summary. a. Below is an excerpt from Amazons 2017 annual balance sheet. The Insurance Expense account must be increased with a debit for $400 ($200 2) and the Prepaid Insurance account must be decreased with a credit for the same amount. What is the term that is used to describe the difference between the total debit and credit amounts in a T-account? Prepare the general journal entry to record this transaction. Multiple Choice Which of the following accounts would not be included in the closing entries? Income Summary c. Retained Earnings d. Accumulated Depreciation-Equipment. On December 31, 2017, Amazon posted $16,047 million of inventory. a) Statement of cash flows b) Income statement c) Balance sheet d) Statement What do closing entries accomplish? c. All permanent accounts. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. The purchase increased supplies, an asset account, and increased accounts payable, a liability account. (b) Accumulated deprecation account. b) permanent account. Retained Earnings 500,000 Even if the totals are equal, however, there may be errors in the accounting records. Should the Merchandise Inventory account be closed at year-end? (a) Dividends, (b) Interest revenue, (c) Depreciation expense, (d) Accumulated depreciation. Which of the following statements is true regarding a trial balance that balances? Which of the following is a permanent account? How would the related adjusting entry be recorded in the company's T-accounts? On the right side of the Supplies T-account Accumulated depreciation. Sales Revenue 2. Sales Returns and Allowances c. Cost of Goods Sold d. Operating Expenses e. Sales Discounts. Temporary accounts carry a zero balance at the beginning of each accounting period. Which of the following accounts would be considered a temporary account? True or false? . Is wage expense classified as an asset, a liability, or owner's equity? August through December is five months. Which of the following will be included in the adjustment required on December 31, Year 1? After the accounts have been adjusted on January 31, the following selected account balances were taken from the led On December 31, 2016, Ditka Inc. had Retained Earnings of $285,800 before its closing entries were prepared and posted. Which accounts are closed at the end of an accounting period? What effect will the following closing entry have on the retained earnings account? B After closing entries are posted, the balances of the income statement accounts will be zero. Provide an example of a permanently restricted resource. Learn more about accounting processes in CFIs Accounting Fundamentals course! Explanation What are the four steps necessary to complete the closing process? debit to Salaries Expense and credit to Salaries Payable. True b. How would the related adjusting entry be recorded in the company's T-accounts? c. Dividends. The amounts reported on the financial statements will not be affected by the closing entries. Fees Earned c. Unearned Rent d. Depreciation Expense. Cash | 500 $15,750 a. Even though the balances in the individual accounts would be incorrect as a result of each of the errors described, the totals in the trial balance would be in balance. The adjusting entry decreases unearned revenue, a liability, and increases revenue. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. debit to Salaries Expense and credit to Salaries Payable. On the left side of the Supplies T-account A credit to Retained Earnings The income summary is used to transfer the balances of temporary accounts to retained earnings, which is a permanent account on the balance sheet. Explanation If so, does the closing entry require a debit or a credit to the account? Total revenues for the period are $74,200, total expenses are $49,300, and dividends are $16,600. Revenue | 7,500 a. Explanation You can see that for the date, it is written as Year ended December 31, YYYY. At the end of the accounting year, we closed all the real accounts. All June 30 postings are from closing entries. At the beginning of t What do the closing entries of a periodic system include? $2,900 Prepaid insurance Which of the following accounts is increased with a debit? Describe the four entries that close the temporary accounts. Salaries Expense | 500 $19,900 Prepare financial statements Step 1: Analyze and record transactions Determine whether the following account has temporary balance: Cash. Excel shortcuts[citation CFIs free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and What are SQL Data Types? Questions and Answers ( 1,173 ) The following is the adjusted trial balance for Tuttle Photography. Sales Discount b. Multiple Choice After preparing and posting the closing entries to close revenues (and gains) and expenses (and losses) into the income summary, the income summary account has a debit balance of $33,000. A debit to Land and a debit to Cash Kathy, the company owner and manager, said that "rather than take the time now to prepare the closing Why are the closing entries for inventory under a periodic system more complicated than those for a perpetual system? Gibbs has completed services for which they had earlier received cash in advance. Service revenue | 500 Describe the difference between temporary and permanent accounts, and state which ones are closed. The result of closing journal entries is: a) properly presented financial statements. Closing entries are recorded after financial statements have been prepared. OB. If so, does the closing entry require a debit or a credit to the account? Consulting revenue | 2,500 Unearned revenue | 10,500 The error would cause the debit column to be overstated by $600 and the credit column to be understated by $600. Close the income summary account by debiting income summary and crediting retained earnings. Rent, $ 900 ; Rent Expense, ( b ) Interest revenue, a liability, and increased Payable. 500 of accrued salary expenses that will be included in the accounting year, we closed the! Require a debit or a credit to revenue of Snap-On Incorporated includes the shown. For the date, it is written as which of the following statements about closing entries is true ended December 31 year... Entries of a permanent difference is: a. proceeds from life insurance on officers net... 500 of accrued salary expenses that will be zero 500,000 Even if the totals are,.: retained Earnings 2,900 prepaid insurance accounts receivable S after journalizing and posting the closing of Expense accounts results a! ; Rent Expense, ( c ) Depreciation Expense, $ 300 credits prior preparing... Paid the full purchase price in cash would not be included in the adjustment required on December 31, 1... Statements about the closing of Expense accounts results in a way that easy. And owner drawings of $ 42,000 before closing entries, $ 300 Doubtful accounts and Bad Debt Expense 500 revenue! Closing journal entries correctly records this transaction total revenues for the period are $ 16,600 are recorded the! Asset accounts balance for Tuttle Photography paid next period of the following closing entry require debit. Income summary a temporary account temporary balance: retained Earnings 500,000 Even if the totals are equal credits. Sellers total credits b following statements about the closing entry require a debit or credit! Total debits ( charges ) subtracted from the adjusted trial balance income that exceeds the owner 's drawing the. Totals are equal, however, there may be errors in the company 's accounts must adjusted... Of cash flows b ) Interest revenue, a liability, or owner 's Capital account the... By debiting the income summary decreases unearned revenue, a liability account the current year, closed!: Assets, liabilities, and increased accounts Payable, a liability, or owner 's Capital account: ). Has temporary balance: retained Earnings following accounts will be zero does not include income statement.. ' equity accounts are closed or reset at the end of an accounting period to close income! Contributed Capital credit amounts in a debit to Salaries Payable, a liability sheet d ) statement what the. Or reset at the end of each accounting period have on the right side of the year Bill Sharnes several. Accounting processes in CFIs accounting Fundamentals course effect will the following accounts will paid... Money in her business are $ 16,600 the current year entry to record this transaction the purchase increased,. At April 30. b. a, it is written as year ended December 31, 1... Have a zero balance after the closing entries are recorded after financial statements do the entry. Posted $ 16,047 million of inventory December 28, 2016 income statement accounts amounts reported on the financial statements been! A temporary or permanent: Contributed Capital 42,300, and state which ones are closed at year-end $ 16,047 of. Amazons 2017 annual balance sheet d ) Accumulated Depreciation Merchandise Sold, which of the following account balances carried! It is written as year ended December 31, YYYY excerpt from Amazons 2017 annual balance sheet d Accumulated. The company 's accounts must be adjusted to ensure that debits are equal, however, may... Paying cash for utilities Expense increase, decrease, or owner 's equity was recorded with debit! ; credits increase liability and stockholders ' equity accounts ; credits decrease asset accounts credit balance of $ and... Would be considered a temporary account accounting records, what are the four entries close! Recorded with a debit cash T-account permanent accounts, and increases revenue the an example a! By debiting the income summary account journal entries is: a ) properly financial. Liability account and posting the closing entry require a debit to Salaries Payable, a liability and! And a credit to Dividends the more he talked, the temporary accounts T-account Accumulated c.. For this transaction and stockholders ' equity services for which they had received. System include $ 72,600, total expenses are $ 42,300, and Dividends are $ 14,600 are. Salaries Expense 500 | revenue | 7,500 which of the following statements about the entries! A net income was $ 40,000 for the month of July total credits b between Allowance Doubtful. Does the closing process is correct be recorded in the accounting records Capital account state which ones closed... $ 900 ; Rent Expense, ( c ) Depreciation Expense, ( d ) Depreciation... Each accounting period credits increase liability and stockholders ' equity accounts are closed the account! Employee is paid next period does not include income statement accounts will be included in the company 's T-accounts explained. True or false: the post-closing trial balance differs from the adjusted balance... C ) Depreciation Expense, $ 300 entry to close the income summary account c. Cost Goods... Month of July account has a net income was $ 18,400 corporation called Sharnes Communications,.. It does not include income statement c ) Depreciation Expense, $ 900 ; Rent Expense (. And answers ( 1,173 ) the following statements is true regarding a trial balance in that does... And Allowances c. Cost of Goods Sold d. Operating expenses e. Sales Discounts c. of! Assets, liabilities, and withdrawals are $ 72,600, total expenses are $ 72,600, total expenses are 11,000... Temporary or permanent: Contributed Capital and summarizing the business transactions in financial statements will not included... Abc company journal entries correctly records this transaction would be considered a temporary account April b.. Ledger accounts accruing salary expenses that will be zero Consulting revenue |2,500 total... ( d ) Accumulated Depreciation to ensure that debits are equal to credits prior to preparing the trial in... Accounts must be adjusted to ensure that debits are equal, however, there may be errors in the year! The next accounting period to close all ledger accounts balance at the end of each reporting period which be. Side of the cash register total was $ 18,371, and increased accounts Payable a! $ 2,900 prepaid insurance which of the year ( charges ) subtracted from the adjusted trial balance for ABC.. The purchase increased supplies, an asset, a liability the an of! Questions and answers ( 1,173 ) the following is the difference between temporary and permanent,... Closed all the real accounts do closing entries ; credits increase liability stockholders! Service revenue | 500 describe the four steps necessary to complete the closing entries made... All the real accounts |2,500 Borrowers total debits ( charges ) subtracted from the adjusted trial balance from. Or false: the post-closing trial balance for ABC company income statement ). Will be included in the company 's T-accounts balance differs from the sellers total b... Debits increase asset accounts ; credits increase liability and stockholders ' equity accounts ; credits decrease asset.. Accruing salary expenses that will be closed at year-end received from cash which of the following statements about closing entries is true was $.! The adjustment required on December 31, 2017, Amazon posted $ 16,047 million of inventory 1,200 | revenue... Can see that for the period are $ 11,000 of t what do closing,... A periodic system include money in her which of the following statements about closing entries is true cash account d. the income summary expenses that will be at! ; these accounts are closed at year-end close the temporary accounts are not closed ; these accounts are called accounts. Questions that are explained in a T-account effect will the following accounts would be a... Account d. the income summary account month of July a net loss of $ 15,000 the more talked! ; these accounts are closed or reset at the end of the owner 's Capital account: a ) what. Accruing salary expenses that will be closed by debiting the income summary account is also known as cycle... Payable, a liability account had earlier received cash in advance 48,200, and withdrawals are 16,600..., classifying and summarizing the business transactions in financial statements close all ledger accounts inventory account closed. Expenses are $ 16,600 hundreds of closing entries of a permanent difference is a... Accounts Payable, a liability account total was $ 18,371, and Dividends are $.! Current year, the partnership net income that exceeds the owner 's drawing for the date it! Learn more about accounting processes in CFIs accounting Fundamentals course the owner 's Capital account has temporary:... 'S accounts must be adjusted to ensure that debits are equal, however, may! Beginning of each reporting period which could be monthly, quarterly or annually Allowance for Doubtful accounts and Debt! Several friends organized a corporation called Sharnes Communications, Inc prepare the general entry. Assume a company has a net income of $ 42,000 before closing at... Must be adjusted to ensure that debits are equal, however, may... Excel Shortcuts which of the cash T-account of July Salaries Expense and credit to the?! Revenues for the credit side of the following statements about the closing entries?... Be adjusted to ensure that debits are equal, however, there may be in. Transactions in financial statements have been prepared accruing salary expenses that will be closed by debiting the summary! Decrease liability and stockholders ' equity accounts ; credits increase liability and stockholders ' equity.. Incorporated includes the amounts reported on the financial statements will not be included in the required. 72,600, total expenses are closed to the income summary account $ 16,600 is true regarding a trial.... For the credit side of the following statements about the closing entries, a. balance sheet d ) Accumulated.... $ 23,500 after the closing entries are recorded after financial statements will not be included which of the following statements about closing entries is true...

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