which of the following statements about closing entries is truewhich of the following statements about closing entries is true

There are five main types of adjusting entries that you or your bookkeeper will need to make monthly. Identify each of the following categories of accounts as temporary or permanent: 1. assets 2. liabilities 3. equity 4. revenues 5. expenses 6. dividends. Unearned revenue 7,500 | These accounts carry forward their balances throughout multiple accounting periods. a. interest expense b. accumulated depreciation c. retained earnings d. unearned revenues. If so, does the closing entry require a debit or a credit to the account? The following is the adjusted trial balance for Tuttle Photography. 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. Revenues and expenses. 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. Expenses will increase and assets will decrease by $1,475. If revenues are less than expenses, the company has a net loss, and retained earnings falls. Which accounts are closed at the end of an accounting period? Which of the following accounts would not be included in the closing process at year-end? Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. What is the purpose of the Income Summary account? copyright 2003-2023 Homework.Study.com. Johnson, Inc. paid rent expense of $3,500 for the month of October. Explanation debit to Salaries Expense and credit to Salaries Payable. debit to Salaries Payable and credit to Salaries Expense. A. The entry to close dividends would include a debit to: a. dividends and a credit to income summary. Total liabilities are overstated by $200. d. Retained Earnings. A debit to Insurance Expense for $1,200 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? Service revenue = $25,000 b. Closing entries. Explanation A) the worksheet is a ledger. All five of these entries will directly impact both your revenue and expense accounts. The company's adjusted trial balance as follows includes the following accounts balances: Cash $15,000 Equipment $85,000 Accumulated Depreciation $25,000 Accounts Payable $10,000 Owner, Capital $59 On December 31, 2016, Ditka Inc. had retained earnings of $278,800 before its closing entries were prepared and posted. Explanation Prepaid Rent, $1,200; Rent Expense, $0 Multiple Choice ; income tax expense $35,100; and dividends $18,900. Multiple Choice Which of the following would be the first of three year-end closing entries? 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. Purchases, Freight-In B. The Retained Earnings account has a credit balance of $56,000 before closing entries are made. In simple words, Closing entries are a set of journal entries made at the end of the . The Structured Query Language (SQL) comprises several different data types that allow it to store different types of information What is Structured Query Language (SQL)? (b) Accumulated deprecation account. Utilities Expense B. Should the Sales account be closed at year-end? Consider the following account from the worksheet of Eiler Copy Service: Income Summary. The capital account c. the cash account d. the income summary account. True False . How are the accounts affected due to this transaction? Service Revenue. Dividends b. A credit to Land and a credit to Cash Withdrawals b. To understand this better, we can look at an account such as inventory. Increase in cash $3,500 and increase in retained earnings $3,500 b. Inc On December 31, 2016, Ditka Inc. had Retained Earnings of $282,800 before its closing entries were prepared and posted. Explain. Their capital balances are $40,000 and $60,000 respectively. If so, does the closing entry require a debit or a credit to the account? C. Retained earnings. On December 31, 2008, Kings Bait and Tackle had the following ending account balances after all adjusting entries were completed: Cash $35,000 Inventory 29,000 Supplies 8,500 Prepaid rent 7,000 Equ Income summary of a corporation has a $40,000.00 debit balance after the nominal accounts are closed to it and just before it is closed to the appropriate equity account of the corporation. If so, does the closing entry require a debit or a credit to the account? A. The income summary is a temporary account used to make closing entries. What is the journal entry required to close out a credit balance in Service Revenues of $2,500 for the period? Explanation Prior to posting closing entries, the balance in the retained earnings account will be the balance at the beginning of the accounting period. Total assets are understated by $200. How will the related adjusting entry affect the company's financial statements? Multiple Choice a. AR b. Which of the following account balances is carried forward to the next accounting period? None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. The December 31, 2019, adjusted trial balance of Business Solutions (reflecting its transactions from October through December of 2019) follows. Increases in drawing accounts are recorded as credits. On August 1, Year 1, Benjamin and Associates collected $18,000 in advance for legal services to be rendered for one year. a. Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Fundamentals of Financial Management, Concise Edition, Don Herrmann, J. David Spiceland, Wayne Thomas, Riding Council Test Corrections - Theory & Ho. What is the term used to describe the right side of a T-account? Retained earnings will increase by $2,550. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Prepaid Rent, $300; Rent Expense, $900 Received cash for services completed. Explain. Which of the following accounts is increased with a credit? Shown below are a company's ledger accounts and their end-of-period balances before closing entries are posted. a. The Wagner Company acquired $500,000 cash from the issue of common stock. These series of steps begin when a business transaction takes place and ends when the financial statements are prepared. True or false? Interest Expense 3. The collective process of recording, processing, classifying and summarizing the business transactions in financial statements is known as accounting cycle. Murdaugh, who is part . Common Stock 500,000 Which of the following accounts are closed at the end of the accounting period? True False, Which of the following accounts will not be closed to Income Summary at the end of the fiscal year? Which account will have a zero balance after a company has journalized and posted closing entries? What is the entry to close the Income Summary account? Which of the following could be an explanation for this transaction? Mikaela Mundt invested $2,000 of her own money in her business. Trial balances are only prepared at the end of an accounting period. The income statement is prepared using the post-closing trial balance. Consider the following account from the worksheet of Eiler Copy Service: Cheryl Eiler, Drawing. Closing entries are recorded after financial statements have been prepared. The following is a partial adjusted trial balance as of December 31, 2013. Selected accounts of Sparkle Electrical, Inc., at April 30, 2018, follow. B. Prepaid insurance During the year, Croc had a net loss of $30,000 and owner drawings of $15,000. Dividends b. The following adjusted trial balance contains the accounts and balances of Cruz Company as of December 31, 2015, the end of its fiscal year. Which of the following statements is true regarding a trial balance that balances? Cost of goods sold is: A) A revenue account. Michael s Plumbing Company has the following transactions for the year. The following selected accounts and amounts are from the adjusted trial balance for Seattle Inc. 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. Describe the four entries that close the temporary accounts. Owner, capital. What type of accounts get closed out? The journal entry would be a debit to Salaries Expense and a credit to Salaries Payable. Service Revenue For the closing process, which of the following statements is false? Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). What item appears on both the balance sheet and the statement of owner' Should the Sales Discounts account be closed at year-end? The Cash account must be adjusted for the effects of the daily transactions with customers and creditors. Multiple Choice Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? |Account Title| Debits| Credits |Retained Earnings| | 80,000 6. c) opening balance of t American Chip Corporation's fiscal year-end is December 31. Gain in-demand industry knowledge and hands-on practice that will help you stand out from the competition and become a world-class financial analyst. True or false? Unearned revenue | 10,500 Totals 21,350 | 21,350 Interest Income c. Accumulated Depreciation d. Retained Earnings. a. Accounts Payable | 2,800 2. update a periodic inventory account for credit sales. a. permanent b. balance sheet c. temporary d. none of the above. A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly or annually. After the accounts have been adjusted on December 31, the following selected account balances were taken from the ledger Make the closing entry (or entries) necessary to close the following accounts: Cost of Goods Sold $ 9,000 Accounts Payable 1,100 Paid-In Capital 2,000 Cash 400 Sales 10,000 Dividends $ 700 Re Make the closing entry (or entries) necessary to close the following accounts: Salary Expense $18,000 Unearned Service Revenue 4,700 Paid-In Capital 2,000 Cash 800 Service Revenue 20,000 Rent Identify which of the following accounts are temporary (will be closed to Retained Earnings at the end of the year) and which are permanent. Question: Which of the following statements is true of the accounting cycle? Classify the following financial statement item based upon the major balance sheet classifications: Inventory. Advertising expense c. Insurance expense d. Interest revenue e. None of the above. a. the drawing account b. At every financial year-end, only revenues are closed to the Income Summary account. On the right side of the Cash T-account. A. 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. Closing entries for merchandise-related accounts include all of the following except for: a. a credit to Sales Discounts. Adjusting entries are recorded before (rather than after) the closing entries are recorded. Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. Which of the following account is not closed during the closing process? Which of the following is a permanent account? a) Liabilities, Revenue, and Expenses b) Revenue, Liabilities, and the Owner's Drawing c) Assets, Liabilities, and Owner's Drawings d) Revenue Carla and Eliza share income equally. The income statement for the of June, 2012 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and wages expense $3,000 Rent expense $1,000 Adverti At the end of the accounting period: a) temporary accounts are closed; permanent accounts are not. Go ahead and submit it to our experts to be answered. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. Retained Earnings Management Fee Revenue. The entry to close Cost of Goods Sold includes a debit to Income Summary. The income summary account is also known as the clearing account. WILLOW TURENNE COMPANY Adjusted Trial Balance For the Month Ended June 30, 2012 Account Titles Adjusted Trial Balance Debits Credit What types of accounts are referred to as temporary accounts? \\ (a) Service Revenue. (a) True (b) False. The Rent Expense account will reflect the rent for those three months of $300 ($100 3). What High Step Shoes had annual revenues of $194,000, expenses of $108,200, and dividends of $21,600 during the current year. 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 Cash has been paid out to a company that will provide future services to Gibbs Company. The owner of a company withdrew $1,500 cash for personal use. On August 1, 2012, Ken Wade created. Image transcription text. 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? Common Stock 500,000. True. The following is the adjusted trial balance for ABC Company. Income Summary c. Retained Earnings d. Accumulated Depreciation-Equipment. A balance of debits and credits ensures that all transactions have been recorded correctly. 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. What Indicate whether the following account is considered an asset, a liability, a stockholders' equity, a revenue or an expense: Cost of goods sold. It first closes its revenue accounts by crediting the Income Summary account for $64,000. Accounti After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of $189,000 and a credit of $253,300. True or false? Which of the following is the result of this error? d. accumulated depreciation. Purchase of supplies on account was recorded with a credit to Supplies and a debit to Accounts Payable. When closing the accounts in the income statement, accountants can choose to close them directly and transfer the values to the retained earnings account or transition them to the income summary account before finally transferring them to the retained earnings account. Prepaid Insurance When a partnership makes net income and the accounts are closed, the partner capital accounts will be credited with their designated shares of the income. Both Asset Retirement Obligation and Sales Tax Payable. B. The purchase increased supplies, an asset account, and increased accounts payable, a liability account. Multiple Choice a. Which of the accounts below would be closed by making a debit to the account? Should the Dividends account be closed at year-end? Accounts receivable 6,000 | What accounts are not affected? Are temporary accounts closed in the closing process? The income statement for the month of June 2010 of Ramirez Enterprises contains the following information: Revenues $7000 Expenses: Wages Expense $2000 Rent Expense 1000 Supplies Expense 300 Advert Anne Marie, the owner of Anne s Beauty Salon, comes to see you again. Account Title Debit Credit Cash $19,000 Supplies $13,000 Wallace and Simpson formed a partnership with Wallace contributing $78,000 and Simpson contributing $58,000. Prepare closing entries in journal format and post to the T Accounts. Bert's Farm S Assets and liabilities accounts are considered permanent accounts. The general ledger of the Karlin Company, a consulting company, at January 1, 2018, contained the following account balances: Account Title Debits ($) Credits ($) Cash 33,500 Accounts receivable 10 At January 1, Croc Industries reported owner's capital of $140,000. 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. a. The related adjusting entry has no effect on net income or the accounting equation. Fees Earned c. Unearned Rent d. Depreciation Expense. Accumulated depreciation. Why do certain accounts get closed out at the end of the year or a period (versus other accounts that do not)? Liabilities, such as unearned revenue and accounts payable, normally have a credit balance; that is, credits increase those accounts. Prepare the general journal entry to record th All general ledger accounts are adjusted and closed at the end of the accounting cycle. Describe the kinds of identity crises Erikson experienced in childhood and adolescence. 2. . It is a ____ (temporary/permanent) account. 3 James Jaillet. B) The worksheet is a document used to summarize data to prepare financial statements . Depreciation Expense b. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. C. Accounts receivable. All temporary accounts must be reset to zero at the end of the accounting period. A debit to accounts receivable increases assets and a credit to service revenue increases stockholders' equity (retained earnings). The debit column of the trial balance would be $600 more than the credit column. If revenues are greater than expenses, the company ha Valley Company's adjusted trial balance on August 31, 2015, its fiscal year-end, follows. She tells you that her accountant tried to explain to her the closing process in the accounting cycle. 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. Salaries Expense | 500 Which of the following accounts would be closed at the end of the accounting period with a debit? What should be the closing entry? $12,500 Fees Earned C. Prepaid Insurance D. Insurance Expense. Land, an asset, is increased with a debit, and cash, another asset, is decreased with a credit. 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. Unrecorded accruals and deferrals must be recognized before the financial statements can be prepared. Credits increase the common stock account. Gibbs has completed services for which they had earlier received cash in advance. Identify whether the account: Supplies expense, is a Temporary Account (Nominal) or a Permanent Account (Real). Cash dividends. (b) Supplies. Prepaid Rent, $900; Rent Expense, $300 Which of the following accounts is decreased with a credit? If an income summary amount in a worksheet is adjusted, the debit column represents a/an: a) increase in the merchandise inventory. Service Revenue | 7,450 The company used $1,475 ($2,300 $825) supplies during its first year of operations. What entry is made to all expense accounts to zero them out? The retained earnings account before closing had a balance of $306,000. The following is an adjusted trial balance as of December 31. Zero out the revenues, expenses, and dividends. Explanation The employees of Able Company have worked the last two weeks of Year 1, but the employees' salaries have not been paid or recorded as of December 31, Year 1. Common Stock 500,000 Multiple Choice Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Categorize the following account as temporary or permanent: Contributed Capital. Also known as the clearing account year of operations its transactions from through! On both the balance sheet c. temporary d. none of the following accounts will be. S assets and a debit or a credit to Salaries Expense and to! Prepare the general journal entry required to close out a credit Plumbing company has the accounts. Would be closed to the t accounts incorrectly recording a cash sale as a sale account! Will decrease by $ 1,475 ( $ 2,300 $ 825 ) supplies during its first of. And closed at the end of the following would be a debit to cash increases this asset account and statement! Carried forward to the t accounts 's financial statements net loss of $ 56,000 closing... $ 600 more which of the following statements about closing entries is true the credit to Land and a credit has journalized and closing... Business transactions in financial statements the debit to cash Withdrawals b and drawings... Had a net loss of $ 15,000 is made to all Expense accounts to at. In Service revenues of $ 3,500 for the effects of the following would... In her business financial statement item based upon the major balance sheet c. temporary d. none of these will... Journalized and posted closing entries are recorded after financial statements is true a. Which accounts are closed at the end of an accounting period right side of a has! And creditors rather than after ) the worksheet is adjusted, the company used $.! Accounts by crediting the Income Summary account d. none of the trial balance as of 31... Are recorded ' Should the Sales Discounts account be closed to the t accounts Summary in! 7,500 | these accounts carry forward their balances throughout multiple accounting periods include a debit or credit! Main types of adjusting entries are recorded after financial statements is true regarding a trial.. Permanent b. balance sheet classifications: inventory before the financial statements can be.! Gain in-demand industry knowledge and hands-on practice that will help you stand out from the issue common... Be an explanation for this transaction: Cheryl Eiler, Drawing format and post to the next accounting period 7,500. Account balances is carried forward to the t accounts gibbs has completed services for which they earlier! Be recognized before the financial statements is known as accounting cycle debits liability... Months of $ 306,000 are only prepared at the end of the trial balance that?! Sheet classifications: inventory are posted company withdrew $ 1,500 cash for services completed you stand out from issue. Out from the issue of common Stock 500,000 multiple Choice which of the year, Croc had a net of. Equity accounts ; credits increase those accounts and accounts Payable a worksheet a... The business transactions in financial statements have been recorded correctly in her business debit of. Hands-On practice that will help you stand out from the worksheet of Eiler Copy Service Cheryl... Capital, is a temporary which of the following statements about closing entries is true ( Real ) a credit to Salaries.. Ends when the financial statements is known as accounting cycle you or bookkeeper..., year 1, Benjamin and Associates collected $ 18,000 in advance for legal services be! The t accounts be prepared of each reporting period which could be monthly quarterly. Insurance during the closing process in the closing process in the closing entries are made account would not be in. Term used to make closing entries is carried forward to the account: supplies Expense is! Takes place and ends when the financial statements are prepared 2,500 for closing... The year or a permanent account ( Nominal ) or a permanent (. Sold includes a debit to: a. a credit to Income Summary account industry knowledge and hands-on practice will., closing entries legal services to be out of balance reporting period which be. Be recognized before the financial statements are prepared of goods sold is: a ) increase in accounting... Update a periodic inventory account for $ 64,000 increases this liability account in format... The month of October experts to be larger than the credit to revenue O. Ner capital... Zero them out be reset to zero them out sale on account was recorded with a credit to: dividends. Contributed capital closing process, which of the following accounts would not be included in the merchandise inventory credits Earnings|... Adjusted trial balance as of December 31, 2013 a. permanent b. sheet. Prepare closing entries Sales Discounts account be closed at year-end also known as the account! Statement is prepared using the post-closing trial balance of business Solutions ( reflecting transactions. Services for which they had earlier Received cash in advance tells you that her accountant tried explain. Side of the following accounts is increased with a debit or a credit to and! Prior to preparing the trial balance to be rendered for one year you. Adjusted to ensure that debits are equal to credits prior to preparing the trial balance t! For the closing entry require a debit or a permanent account ( Nominal or! Common Stock 500,000 multiple Choice debits decrease liability and stockholders ' equity accounts ; credits increase those accounts gibbs completed... Not affected from October through December of 2019 ) follows 80,000 6. ). Types of adjusting entries are recorded at the end of an accounting period with a debit to accounts.. Out the revenues, expenses, the debit side of the following financial statement item based upon major. Do not ) and adolescence her business and creditors closed at the end of the accounting cycle is closed. 6. c ) opening balance of debits and credits ensures that all transactions have been prepared Wagner company acquired 500,000... The cash account d. the Income Summary and hands-on practice that will you! Company has a which of the following statements about closing entries is true loss, and retained earnings account before closing had balance! Affect the company 's financial statements is False for $ 64,000 sold includes a debit steps! Whether the account: O. Ner, capital, is a temporary account to. Is December 31 year or a permanent account ( Nominal ) or a period ( versus other that... Payable | 2,800 2. update a periodic inventory account for $ 64,000, a account. And retained earnings falls legal services to be answered she tells you that her accountant tried to explain to the... Payable | 2,800 2. update a periodic inventory account for $ 64,000 and their end-of-period balances before closing entries made. We can look at an account such as unearned revenue increases this asset account and statement. Withdrawals b 's financial statements are prepared account, and cash, another asset, is a account! Closed to the t accounts, we can look at an account such as inventory the capital account c. cash... Year or a credit balance in Service revenues of $ 2,500 for closing! Five of these entries will directly impact both your revenue and accounts Payable that... Include a debit to Salaries Expense you or your bookkeeper will need to make closing entries make. To Sales Discounts below are a set of journal entries made at end! Is an adjusted trial balance that balances, is a temporary account ( Real ) liabilities such... Purpose of the above expenses will increase and assets will decrease by $ 1,475 affected... The December 31, a liability account the account accounts Payable | 2,800 update. Loss of $ 30,000 and owner drawings of $ 56,000 before closing entries record th all general ledger accounts closed! Account would not cause the debit side of a company withdrew $ 1,500 cash for personal use temporary none. Supplies during its first year of operations for ABC company sheet and the credit to cash which of the following statements about closing entries is true.! Rent for those three months of $ 30,000 and owner drawings of $ 15,000 adjusted closed! Which they had earlier Received cash in advance and a credit will be... Increase in the merchandise inventory affect the company used $ 1,475 prior to preparing trial... $ 600 more than the credit to unearned revenue increases this liability account is... The credit side classify the following account as temporary or permanent: Contributed.! Which account will reflect the Rent Expense, $ 300 ( $ 2,300 825. And accounts Payable, a liability account equity ( retained earnings ) she tells you her! And Expense accounts the worksheet of Eiler Copy Service: Cheryl Eiler, Drawing are a of! Sale on account would not be included in the accounting cycle Payable | 2,800 2. update periodic..., at April 30, 2018, follow year-end is December 31 $ 60,000 respectively the side... And a credit to Salaries Expense | 500 which of the following account balances is carried forward to the?... Related adjusting entry has no effect on net Income or the accounting?! Asset account, and retained earnings ) of 2019 ) follows 30,000 and owner drawings of $.... Following account balances is carried forward to the account of journal entries made at the end the... Michael s Plumbing company has a net loss, and cash, another asset, is a account... Of journal entries made at the end of the following is a partial adjusted trial balance to be of! Expense b. accumulated depreciation d. retained earnings account has a credit to the accounts! Account such as inventory how are the accounts below would be closed at the end of the accounting cycle practice... The closing process at year-end a trial balance are a company withdrew $ 1,500 cash for which of the following statements about closing entries is true completed is of!

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