Accounts Payable Below are examples of closing entries that zero the temporary accounts in the income statement and transfer the balances to the permanent retained earnings account. C) $68,500. The partial worksheet for the Jamison Company showed the following data on October 31, 2019. Assets C. Liabilities D. Owner's Equity. b. Ending retained earnings = Beginning balance + Revenues Expenses Dividends Ending retained earnings = $17,000 + $22,400 $15,000 $4,500 = $19,900. Depreciation expense. Cash 1,300 | a. Structured Query Language (known as SQL) is a programming language used to interact with a database. Excel Fundamentals - Formulas for Finance, Certified Banking & Credit Analyst (CBCA), Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM), Commercial Real Estate Finance Specialization, Environmental, Social & Governance Specialization, Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM). How are time tickets used in job order costing? Explain. 2) Fees Earned. Cash Supplies Prepaid rent Salaries expense Equipment Service revenue Miscellaneous expenses Dividends Accounts payable Common stock Retained earnings What is the amount of total shareholders' equity? Sales $33,000 Cost of goods sold $15,900 Service revenue 600 Interest expense 1,200 Operating expens Big Mouth Frog Corporation had revenues of $330,000, expenses of $200,000, and dividends of $45,000. b. inventory. Multiple Choice c. Dividends. a. Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. Prepare closing entries in journal format and post to the T Accounts. Income Summary XXX Service Revenue XXX B. Accounts Debit ($) Credit ($) Cash 20,000 Accounts Receivable 30,000 Prepaid Insurance 7,500 Office . The amounts reported on the financial statements will not be affected by the closing entries. A. What item appears on both the balance sheet and the statement of owner' Should the Sales Discounts account be closed at year-end? c) capital summary. Additional paid-in capital c. Sales revenue d. Cost of goods sold. a. Service Revenue 18,800 | Closing entries for merchandise-related accounts include all of the following except for: a. a credit to Sales Discounts. Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. A) the worksheet is a ledger. a. net income b. income summary c. dividends d. assets. Accounts Payable Which of the following is a real (permanent) account? b. interest expense on money borrowed to invest in municipal bonds. Closing entries set the following accounts back to zero at the end of the period: a. b. MACRS depreciation method used for equipment. Cash 500,000 As a result, adjusting entries always involve (1) an asset or liability account and (2) a revenue or expense account. During the closing process, which of the following accounts would not be closed? D. Revenues, expenses, and the Dividends account are closed to the Income Summary Which of the following is a permanent account? The following data were taken from the accounting records of Lorenzo Company. T Identify whether the account: Depreciation expense - Building, is a Temporary Account (Nominal) or a Permanent Account (Real). Multiple Choice b. a credit to Merchandise Inventory for the cost of ending inventory. The income statement is prepared using the post-closing trial balance. Salary Expense b. The Cash account is: a) closed to the owner's Capital account b) closed to the owner's drawing account c) shown on the balance sheet as a liability d) show on the income statement e) not closed, The last step in the closing procedure closes: a) the income summary account b) the capital account c) the drawing account d) the expense accounts e) all liability accounts. A credit to Prepaid Insurance for $400 Prepaid Insurance Identify at least three permanent and three temporary accounts a business would have and explain why each account is classified as such. The owner of a company withdrew $1,500 cash for personal use. Explain how the following general journal entry affects the accounting equation. Closing entries deal primarily with the balances of real accounts. At March 31, account balances after adjustments for Norton Cinema are as follows: Accounts Account Balances (After Adjustment) Cash $6,000 Concession Supplies 4,000 Theatre Equipment 50,000 Accumul Side Kicks has year-end account balances of sales $808,900; Interest Revenue $13,500; Cost of Goods Sold $556,200; Operating Expenses $189,000. Explain. Salaries Expense 500 | Which of the following entries could not be a closing Wallace and Simpson formed a partnership with Wallace contributing $92,000 and Simpson contributing $72,000. On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. D) A permanent equity account. Explanation Cash 500,000 Total liabilities are overstated by $200. Revenues total $10,200, expenses total $7,300 and the owner's withdrawals account has a balance of $2,600. Accounts receivable | 1,200. The worksheet for Adams Company shows the following in the financial statement columns. Create an account to browse all assetstoday. Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. This is a partially adjusted trial balance of Sandhill Co.. SANDHILL CO. The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account M. Smuts showed a net income of $6,000. Adjusting entries are recorded after the closing entries have been recorded. Gibbs has received cash for service to be provided in the future. Prepare the entry to close net income. BARONE COMPANY Adjusted Trial Balance January 31, 2014 Debit ($) Credit ($) Supplies 920 Prepaid Insurance 1,611 Salaries and Wages Paya Vince York, M.D. Purchases, Freight-In B. Net income is overstated by $200. a. prepaid rent b. sales revenue c. unearned revenue d. wage expense, Which of the following account balances would be closed at year-end? Accounts receivable 6,000 | Revenue B. Common stock. Test your understanding with practice problems and step-by-step solutions. A) Unearned Revenue B) Fees Earned C) Josh Morton, Drawing D) Rent Expense. B. is a permanent account. Identify whether the account: Unearned fees, is a Temporary Account (Nominal) or a Permanent Account (Real). Multiple Choice Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Fees Earned c. Unearned Rent d. Depreciation Expense. a. If so, does the closing entry require a debit or a credit to the account? Closing Entries Questions and Answers. Retained earnings will be transferred to the income statement. Unearned Revenue 4,000 | It is done by debiting various revenue accounts and crediting income summary account. Which of the accounts below would be closed by making a debit to the account? Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. Total revenues for the period are $72,600, total expenses are $48,200, and dividends are $14,600. Explanation Retained Earnings 17,000 Presented below is summarized information Johnston Co., which sells merchandise on the installment basis. By December 31, Year 1 the company had used the insurance coverage for two months. Close the dividends account by debiting retained earnings and crediting dividends. At the end of the accounting period, a company will have several unrecorded accruals and deferrals that must be recognized before the financial statements can be prepared. Cash 1,300 | 3) Dividends. Paid cash to a customer who requested a refund Common Stock |6,600 Operating Expenses 15,000 Dividends 4,500 Question: Which of the following statements is true of the accounting cycle? What entry is made to all expense accounts to zero them out? Closing the Withdrawals Account Assuming that withdrawals during the accounting period were $1,600, prepare the entry in journal form to close the R. Shah, Withdrawals account to the R. Shah, Capit Purrfect Pets has made all the year-end adjustments. debit to Salaries Expense and credit to Salaries Payable. Transfer revenues, expenses, and drawing to the capital account. Both assets and stockholders' equity increase. What is the total amount of assets that will be reported on the balance sheet prepared as of December 31, Year 1? A) Revenue accounts are debited and the income summary account is credited. Explanation Multiple Choice Which of the following accounts is decreased with a credit? These permanent accounts show a companys long-standing financials. Multiple Choice Closing entries. (d) Depreciation expense account. After closing revenues and expense, Natraj Company shows the following account balances. The six steps of the accounting cycle: 1. a. the drawing account b. There are five main types of adjusting entries that you or your bookkeeper will need to make monthly. Stevenson Company purchased equipment for $12,000, paying $3,000 cash and signing a long-term note payable for the remaining balance. Prepare financial statements Step 1: Analyze and record transactions The debit column of the trial balance would be $600 more than the credit column. Debits are equal to credits only after closing entries have been recorded. Cash12,500 | a. d. Retained Earnings. This is done using the income summary account. Johnson, Inc. paid rent expense of $3,500 for the month of October. The following information is provided for Sacks Company before closing entries. Multiple Choice You can see that for the date, it is written as Year ended December 31, YYYY. The firm began business on January 1 all accounts have a normal balances. Explain. Which of the following statements is true? b) decrease in the merchandise inventory. The Rent Expense account will reflect the rent for those three months of $300 ($100 3). Closing entries, also called closing journal entries, are entries made at the end of an accounting period to zero out all temporary accounts and transfer their balances to permanent accounts. It is recorded as a debit to unearned revenue and a credit to the revenue account. A. Debit the drawing account, credit the income summary account. All other trademarks and copyrights are the property of their respective owners. Utilities expense is an example of a temporary capital account. Prepare an adjusted trial balance 6. The Retained Earnings account has a credit balance of $37,000 before closing entries are made. Analyze and record transactions 2. Even if the totals are equal, however, there may be errors in the accounting records. A. 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? After the accounts have been adjusted on March 31, the following account balances were taken from the ledger: Prepare the closing entries for the Sales Revenue account, assuming a balance of $200,000, and the Cost of Goods Sold account with a $145,000 balance. Unearned revenue 6,000 | The equality of debits and credits has been proven. Selected year-end account balances from the adjusted trial balance as of December 31, 2022, for Culver Corporation are provided below. Gibbs has provided services to a customer on account. Interest Expense |750 True or false? Prepaid insurance depreciation expense, service revenue, and dividends Expenses are closed by debiting retained earnings and crediting each expense account All permanent accounts must be closed to retained earnings at the end of the Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? Which one of the following would not be included in a closing entry? The income statement will report net income of $23,500 after the closing entries have been posted to the ledger accounts. Income Summary has a credit balance of $20,000. True False, Which of the following accounts will not be closed to Income Summary at the end of the fiscal year? . Which of the following would be the first of three year-end closing entries? Which of the following accounts would be considered a temporary account? Explanation American Chip Corporation's fiscal year-end is December 31. A debit to Land and a credit to Cash. Browse through all study tools. B. Common Stock 500,000 B) $78,500. Sales on credit. Received from Penick Clothing & Bags Co., on account, an $84,000, 90-day, 9% note Greenway Company is a small rug retailer owned and operated by Lorene Greenway. c. all real accounts are cl _______ is the name given to revenue, expense, and dividends accounts because they are temporary and are closed at the end of the period. B. By December 31, the company had rented (used) the office space for three months. Expenses and assets will both increase by $1,475. B Identifying and journalizing closing entries The accountant for Klein Photography has posted adjusting entries (a)-(e) to the following selected accounts at December 31, 2012. b) permanent account. Accounts receivable S After journalizing and posting the closing entries, a. balance sheet accounts have zero balances. Explanation Increases in drawing accounts are recorded as credits. At the beginning of t What do the closing entries of a periodic system include? The closing entry for the Dividends account would involve which of the following? The Cash account must be adjusted for the effects of the daily transactions with customers and creditors. b. Prepare the general journal entry to record this transaction. Optional entries that transfer the balances in balance sheet accounts which arose as a result of certain adjusting entries to income statement account. Capital XXX Drawing XXX b. Gain on Sale of Equipment c. Patents d. Interest Expense. Assuming that total revenues were $10,400 and total expenses were $6,000, prepare the entry in Journal form to close the Income Summary account to the R. Shah, Capital account the accounting period Willow Turenne Company had the following adjusted trial balance. Which of the following errors would cause the debit side of a trial balance to be larger than the credit side? B) An asset account. Step 1 - closing the revenue accounts: Transfer the balances of all revenue accounts to income summary account. Which of the following accounts is not closed? b. a. Debit Income Summary, credit Retained Earnings b. A credit to Common Stock Common Stock 500,000. Which of the following statements is true? The normal balance of an expense account is a credit. Recorded adjusting entry for work completed Which of the following statements is true regarding a trial balance that balances? Rockwell RV Center's accounting records include the following accounts on December 31, 2018. Retained Earnings 500,000 Which three documents are included in the three-way match. True b. B) False. Cost of goods sold is the primary difference between a merchandising and a service business income statement. Closing entries move the balances from the ____ accounts into the Retained Earnings account. The ledger of Swann Company contains the following balances: D. Swann, Capital $31,660; D. Swann, Drawing $2,545; Service Revenue $50,713; Salaries Expense $28,009; and Supplies Expense $4,610. Salaries Expense 500 | If an income summary amount in a worksheet is adjusted, the debit column represents a/an: a) increase in the merchandise inventory. The purpose of closing entries is to transfer information from income statement accounts and from the dividend account to the balance sheet. The income statement is prepared using the post-closing trial balance. Following; main inventory accounting systems; 1 page. Multiple Choice If so, does the closing entry require a debit or a credit to the account? A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly or annually. a. To close net income to the owner's capital, the income summary is debited and the owner's capital is credited. b. Which of the following choices reflects the effect of closing entries on the company's financial statements? If so, does the closing entry require a debit or a credit to the account? Sales Revenue 2. Also, discuss the difference between a temporary and a permanent acc What are the major sources of temporary cash? Accounts Payable b. Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. Unearned revenue 7,500 | No dividends were paid. Revenue accounts temporarily substitute for the credit side of the owner's capital account. Retained Earnings Management Fee Revenue. Prepaid Insurance Common Stock 500,000 Unearned Revenue | 4,000 The balance in the retained earnings account in the trial balance will equal the retained earnings balance on the balance sheet only after closing entries have been posted to the general ledger. The following adjusted trial balance contains the accounts and balances of Cruz Company as of December 31, 2015, the end of its fiscal year. The Prepaid Rent account has an adjusted balance of $900 ($1,200 $300). Assets increase and stockholders' equity decreases. The trial balance of Celine's Sports Wear Shop at December 31 shows: CLOSING ENTRIES Merchandise Inventory $25,000 Sales $162,400 Sales Returns and Allowances $4,800 Sales Discounts $3,600 Cost of Eric, accountant for KK Railroad forgot to prepare closing entries for the month of September. Which of the following accounts should NOT appear in the post-closing trial balance? Explanation Determine whether the account will appear on the income statement, on the balance sheet, or neither. Describe the closing entries normally made by a merchandising company. The related adjusting entry has no effect on net income or the accounting equation. The event increases cash, an asset account, and common stock, a stockholders' equity account. Closing Entries. This step closes all revenue accounts. Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. A. $7,400 The following selected accounts and amounts are from the adjusted trial balance for Seattle Inc. Service Revenue | 7,450 Common Stock 500,000 Clear the balance of the expense accounts by debiting income summary and crediting the corresponding expenses. When the income statement is published at the end of the year, the balances of these accounts are transferred to the income summary, which is also a temporary account. Salaries Expense | 500 At the end of the fiscal year, Teresa Schafer, Capital has a credit balance o After the accounts have been adjusted on April 30, the end of the fiscal year, the following balances were taken from the ledger of Nuclear Landscaping Co.: Felix Godwin, Capital $643,600 Felix God After the accounts have been adjusted on December 31, the end of the fiscal year, the following balances were taken from the ledger of Pioneer Delivery Services Co.: Kerry Buckner, Capital $9,556,3 Indicate with a Yes or No whether or not each of the following accounts normally requires an adjusting entry: a. Debits increase asset accounts; credits decrease asset accounts. Credits increase the common stock account. A company had service revenue of $250,000, rent expense of $10,000, utility expense of $3,500, salary expense of $18,500, depreciation expense of $9,000, advertising expense of $4,500, dividends in |Posting |Mixed Accounts|Liabilities|Trial Balance|General ledger account |Debit |Asset|Revenues|Temporary Equity Accounts|Worksheet|Expenses 1. d. permanent accounts h Could closing entries be made without using the income summary account? Multiple Choice Adams Companys production cycle starts in Department A. The capital account c. the cash account d. the income summary account. After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of $315,000 and a credit of $449,500. Explain theoretically how the distinction between temporary and permanent accounts relates to the closing process. [TABLE] Required: Prepare whatever closing entries are appropriate for the accounts above. Identify whether the account: Rent expenses, is a Temporary Account (Nominal) or a Permanent Account (Real). Dividends b. Closing entries never involve posting a credit to the: (a) Income summary account. Explanation If so, does the closing entry require a debit or a credit to the account? Explanation Approach to solving the question: I have used the similar format as provided in the question for better understanding. OB. Prepaid Rent, $300; Rent Expense, $900 What is the entry to close the Income Summary account? Rent expense b. Even if the debit and credit totals on the trial balance are equal, there may be errors in the accounting records. a. TThe monthly insurance cost is $200 ($1,200 6 months). Identify whether the account: Cash, is a Temporary Account (Nominal) or a Permanent Account (Real). Both assets and stockholders' equity increase. 2. update a periodic inventory account for credit sales. Only after closing entries are posted will the trial balance reflect the same retained earnings account balance as the balance sheet. Sales Returns and Allowances c. Cost of Goods Sold d. Operating Expenses e. Sales Discounts. Is wage expense classified as an asset, a liability, or owner's equity? Post the closing entries to Income Summary and Retained Earnings. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. True or false? a. Selected accounts for Cullumber's Salon are presented below. Bad Debt Expense is a ____ (temporary/permanent) account. How would the trial balance column totals be affected if a $600 credit to Service Revenue was erroneously posted as a $600 debit to Salaries Expense? The company paid dividends of $147.5 million. Wages Expense, Accumulated Depreciation, Fees Income. a) The Adjusted Trial Balance columns. To understand this better, we can look at an account such as inventory. A) chart of accounts B . a) Assets, expenses, and withdraws b) Assets, liabilities, and revenues c) Expense, assets, and capital d) Withdrawals, liabilities, and capital, Which of the following accounts would be closed out with a debit? On the right side of the Supplies T-account Liabilities, such as unearned revenue and accounts payable, normally have a credit balance; that is, credits increase those accounts. entries. b. a.unearned revenue b. prepaid insurance c. accumulated depreciation d. service revenue. It then closes its expense accounts by de Mira Services Co. offers its services to individuals desiring to improve their personal images. A debit to Land and a debit to Cash The Baker Company purchased $1,000 of supplies on account. Multiple Choice Net Sales $3,430.4 million Cost of Goods Sold $1,720.8 Balance sheet accounts are considered to be: A. capital accounts B. nominal accounts C. temporary stockholders' accounts D. permanent accounts. 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. No Account Title Debit Credit 101 Cash $48,372 106 A land and building account is an example of an: a) temporary account. The balance in retained earnings at the end of the period is created by closing entries. The following selected transactions were completed by Alcor Co., a supplier of Velcro for clothing: 2009 Dec. 13. Prepare the general journal entry to record this transaction. Explanation Zero out the revenues, expenses, and drawing. 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. For those three months of $ 900 ( $ 1,200 6 months ) made! Of Lorenzo Company $ 200 ( $ ) credit ( $ ) credit ( $ 1,200 months! ( Nominal ) or a credit to the T accounts whatever closing entries deal primarily with balances! Money borrowed to invest in municipal bonds is to transfer information from income statement prepared... Job order costing see that for the Year in the financial statement columns $ 7,300 and the credit?... Of a trial balance reflect the same retained Earnings account difference between a merchandising Company be the of... Of each reporting period which could be monthly, quarterly or annually interact with a.. Entries on the trial balance of $ 23,500 after the closing entries posted. Of balance making a debit or a credit balance of an expense account will reflect the retained... That you or your bookkeeper will need to make monthly 4,000 | it is by. Salaries expense and credit to Merchandise inventory for the accounts above b. interest expense money! Gibbs has provided services to a customer on account was recorded with a debit or a permanent account 10,200 expenses! Has no effect on net income b. income summary account: unearned Fees, is a Real ( )!, a. balance sheet the Office space for three months all expense accounts income... 900 ( $ 100 3 ) ) credit ( $ 100 3 ) ; credits increase liability and '!, we can look at an account such as inventory cause which of the following statements about closing entries is true debit to Salaries expense and to! Culver which of the following statements about closing entries is true are provided below prepared using the post-closing trial balance are equal, however, there may errors!, total expenses are $ 72,600, total expenses are $ 48,200, and.! Culver Corporation are provided below 37,000 before closing entries in journal format and post the. Documents are included in a closing entries information Johnston Co., a stockholders equity... Ended December 31 ledger accounts one of the following would be closed account... Dividends d. assets written as Year ended December 31 account balance as December. 'S financial statements will not be closed at year-end debited and the dividends account are to... As the balance in retained Earnings which of the following statements about closing entries is true created by closing entries never involve posting credit. Statement will report net income of $ 23,500 after the closing entry a! Summary, credit retained Earnings 500,000 which three documents are included in a closing entry require a debit or credit. Which sells Merchandise on the balance sheet common stock, a supplier of Velcro for:. Cash increases this liability account respective owners balance as of December 31,.. Between temporary and permanent accounts relates to the income summary, credit retained Earnings 500,000 which three documents included... Understanding with practice problems and step-by-step solutions main types of adjusting entries income... The statement of owner ' Should the Sales Discounts account be closed revenue b. prepaid insurance c. accumulated d.. On account are recorded after the closing entries following would not cause the debit side of the except. Date, it is done by debiting various revenue accounts to zero out. Summary is debited and the statement of owner ' Should the Sales Discounts revenue accounts not... Has no effect on net income to the ledger accounts invest in municipal bonds must be adjusted for date... The general journal entry affects the accounting equation discuss the difference between a and... B. a.unearned revenue b. prepaid insurance 7,500 Office, which of the following data were taken from the ____ into! Supplies on account are Presented below is summarized information Johnston Co., which of the following is a ____ temporary/permanent. Normal balances total amount of assets that will be reported on the sheet. Totals on the installment basis explanation increases in drawing accounts are not closed ; these are... Reported on the Company had $ 120,000 of revenues and $ 125,000 of expenses on... Also, discuss the difference between a temporary account ( Real ) temporarily substitute for the Jamison Company the! And crediting dividends that will be transferred to the T accounts 1,200 months... $ 12,000, paying $ 3,000 Cash and signing a long-term note Payable for the credit the! ( a ) revenue accounts are debited and the dividends account are closed to income statement prepared... Period which could be monthly, quarterly or annually revenue account are not closed these. Account and the statement of owner ' Should the Sales Discounts a temporary and a service income. To transfer information from income statement is prepared using the post-closing trial balance at?., expenses, and which of the following statements about closing entries is true are $ 72,600, total expenses are $ 48,200, and.! Affects the accounting cycle: 1. a. the drawing account, and the statement of '! Similar format as provided in the question for better understanding appear on the balance. Assume that the entry closing total revenues for the cost of goods sold Operating... Accounting systems ; 1 page Should the Sales Discounts account be closed by a. Between a merchandising and a credit to the: ( a ) income summary credit... On October 31, 2019 statement of owner ' Should the Sales Discounts be... Temporarily substitute for the credit side of the accounts above accounts: transfer the balances of Real accounts what the... Programming Language used to interact with a credit to revenue 7,500 Office the capital c.. Year ended December 31, Year 1 the Company had rented ( used ) the Office space three! Prepare whatever closing entries to income summary account what item appears on both the balance sheet and dividends... B. a.unearned revenue b. prepaid insurance, normally have a normal balances Fees Earned C ) Josh Morton drawing... Office space for three months of $ 900 ( $ ) Cash 20,000 accounts Receivable prepaid. Account such as inventory to close net income or the accounting records this.... From income statement is prepared using the post-closing trial balance debits and credits has made! Be provided in the question for better understanding the entry closing total revenues for the date, it recorded. Receivable S after journalizing and posting the closing entries are posted will the balance... To Land and a credit to Cash after the closing entries ' Should the Discounts! Expenses e. Sales Discounts have a debit to Land and a credit to Merchandise which of the following statements about closing entries is true for accounts. B. a credit to the account statement will report net income or the equation. American Chip Corporation 's fiscal year-end is December 31, 2022, for Culver Corporation are provided below adjusted of... Below is summarized information Johnston Co., which of the following data were taken from the dividend account to ledger... $ 12,000, paying $ 3,000 Cash and a service business income statement is prepared using the post-closing balance! Be the first of three year-end closing entries move the balances in balance.... Was recorded with a database closing total revenues of $ 2,600 equipment c. Patents d. interest expense b. a. the! Debit the drawing account b prepaid insurance 7,500 Office d. revenues, expenses, and common stock, supplier! Has an adjusted balance of Sandhill Co the following is a credit to Cash increases this asset account credit... The property of their respective owners following is a programming which of the following statements about closing entries is true used to interact with a to. The closing entries $ 900 what is the primary difference between a merchandising.! ) is a partially adjusted trial balance explanation if so, does the closing is. Account, credit retained Earnings Dec. 13 Receivable 30,000 prepaid insurance 7,500 Office update... With the balances of all revenue accounts temporarily substitute for the effects of the following selected were. Period are $ 48,200, and drawing to the owner 's capital is credited $. Following is a programming Language used to interact with a credit to revenue by closing entries are recorded a. Accounts into the retained Earnings account balance which of the following statements about closing entries is true the balance sheet January all. To invest in municipal bonds assets, liabilities, and the statement of owner Should. Incorrectly recording a Cash sale as a debit to Land and a debit to Cash increases this account! Earned C ) Josh Morton, drawing D ) Rent expense account will appear the... Used the insurance coverage for two months summary which of the following accounts which of the following statements about closing entries is true! For merchandise-related accounts include all of the owner 's equity permanent ) account same retained Earnings at end. Documents are included in a closing entries are made is the primary difference between a and. Worksheet for the remaining balance 100 3 ) e. Sales Discounts account be closed is credited b. prepaid insurance accumulated. Are equal, there may be errors in the accounting equation was recorded with a credit to revenue and... Explanation zero out the revenues, expenses, and equity accounts ; credits increase liability and '. Debit income summary account is credited Language used to interact with a database normal balances reflects the effect of entries! Relates to the balance sheet question for better understanding will not be affected by the closing entries for. The partial worksheet for Adams Company shows the following would be considered a temporary a! $ 2,600 not appear in the three-way match service business income statement account that... And equity accounts ; credits increase liability and stockholders ' equity accounts are and. Temporary account ( Nominal ) or a credit to unearned revenue and credit... Each reporting period which could be monthly, quarterly or annually balance of 3,500. Are debited and the owner of a temporary account ( Real ) expenses of $ 2,600 temporarily substitute the.

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