She tells you that her accountant tried to explain to her the closing process in the accounting cycle. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. They. The income summary is a temporary account used to make closing entries. Explain. a. 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. Identify whether the account: Fees earned, is a Temporary Account (Nominal) or a Permanent Account (Real). Prepare journal entries to close the temporary accounts and then post these entries to the T-accounts. The company recently issued th A company paid $2,410 for utility costs on its manufacturing facility. The Wagner Company acquired $500,000 cash from the issue of common stock. 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. Cash, an asset, has been increased with a debit, and unearned revenue, a liability, has been increased with a credit. The following is an adjusted trial balance as of December 31. Cash 500,000 Capital XXX Drawing XXX b. Explain how the following general journal entry affects the accounting equation. True or false? Cash | 6,000 b) decrease in the merchandise inventory. P Imex Services Co. offers its services to individuals desiring to improve their personal images. This misclassification (crediting the wrong account) will not cause the debit and credit totals on the trial balance to be out of balance. Which of the following accounts are closed at the end of the accounting period? a. c. retained earnings is up-to-date. Will receiving cash for fees earned increase or decrease stockholders' equity? (c) Prepaid Insurance. Note how they were reflected in his theory. For example, equal trial balance totals would not disclose errors like the following: failure to record transactions; misclassifications (such as debiting the wrong account); or incorrectly recording the amount of a transaction. Determine whether the following account has temporary balance: Common Stock. Prior to posting closing entries, the balance in the retained earnings account will be the balance at the beginning of the accounting period. b. MACRS depreciation method used for equipment. A credit to Dividends $23,200, $15,750 Michael s Plumbing Company has the following transactions for the year. Explanation On December 31, Year 1, the required adjusting entry was recorded. a. Unearned Revenue 4,000 | How do you close the expense accounts? c) that the Income Statement balances. Prepare the general journal entry to record th All general ledger accounts are adjusted and closed at the end of the accounting cycle. b. This is a partially adjusted trial balance of Sandhill Co.. SANDHILL CO. Which of the following would be the first of three year-end closing entries? The following is the adjusted trial balance for Tuttle Photography. Which of the following statements regarding closing journal entries is correct? The debit column of the trial balance would be $1,200 more than the credit column. 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. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Accounts Payable | 2,800 Which of the following accounts is increased with a credit? entries. a. - What type of information is contained in nominal accounts, and what type of information is contained in real accounts? Closing Entry: A closing entry is a journal entry made at the end of the accounting period in which data is moved into the permanent accounts on the balance sheet from temporary accounts on the . How will the related adjusting entry affect the company's financial statements? American Chip Corporation's fiscal year-end is December 31. Retained Earnings | 4,500 d) permanent accoun Categorize the following account as temporary or permanent: Revenue. True or false? Cash | 500 Explanation Journal Account Title from Chart of Accounts Tab. How would the related adjusting entry be recorded in the company's T-accounts? This system is called double-entry accounting. Prepaid Rent $19,900 The ledger of Rios Company contains the following balances: Owner's Capital $30,000; Owners Drawings $2,000; Service Revenue $50,000; Salaries and Wages Expense $27,000; and Supplies Expense $7,000 Are temporary accounts included in a company's chart of accounts, like rent, water, and salary expenses? Increases in drawing accounts are recorded as credits. No dividends were paid. Multiple Choice If so, does the closing entry require a debit or a credit to the account? Which of the following accounts would not appear in a closing entry? Which of the following accounts would not be included in the closing entries? A transaction has been recorded in the general journal of Manella Company as follows: Unearned revenue 7,500 | Stockholders' equity accounts, such as common stock, normally have a credit balance; that is, credits increase those accounts. Temporary accounts include all of the following except: a) Withdrawals b) Rent Expense c) Prepaid Rent d) Income Summary. Are permanent accounts closed in the closing process? Why sales account would be debited at the end of the accounting period? a. the drawing account b. Describe the four entries that close the temporary accounts. B) The worksheet is a document used to summarize data to prepare financial statements . d. Retained Earnings. You can see that for the date, it is written as Year ended December 31, YYYY. Which of the following will be included in the adjustment required on December 31, Year 1? 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. It then closes its expense accounts by de Mira Services Co. offers its services to individuals desiring to improve their personal images. Cash 500,000 The credit to the dividends account leaves a zero balance in that account. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. Prepare adjusting entries at the end of the period 5. Unearned Revenue 4,000 | Which of the following account balances is carried forward to the next accounting period? The six steps of the accounting cycle: 1. The amounts reported on the financial statements will not be affected by the closing entries. Credits increase the common stock account. Prepare the general journal entry to record this transaction. C The correct entry to close the dividend . The balance in retained earnings at the end of the period is created by closing entries. Journalize the entry to record the cash receipts and cash sales. Explanation Merchandise Inventory b. debit to Salaries Expense and credit to Cash. On the left side of the Accounts Payable T-account A credit to Prepaid Insurance for $400 Interest Income c. Accumulated Depreciation d. Retained Earnings. Which of the following accounts is decreased with a credit? Common Stock 500,000 Consulting revenue | 1,300 Is wage expense classified as an asset, a liability, or owner's equity? T Identify whether the account: Depreciation expense - Building, is a Temporary Account (Nominal) or a Permanent Account (Real). It is recorded as a debit in the Cash T-account and a credit to the Common Stock account. Which of the following accounts would be closed at the end of the accounting period with a debit? runs his own medical practice. Cash 500,000 The collective process of recording, processing, classifying and summarizing the business transactions in financial statements is known as accounting cycle. Gibbs has received cash for service to be provided in the future. 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. 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. 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. Which of the following accounts will not be closed to Income Summary at the end of the fiscal year? Unearned Revenue | 1,500 Total assets are understated by $200. The following account balances were taken from the adjusted trial balance of Kendall Company: Explanation The Baker Company purchased $1,000 of supplies on account. Explanation Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). Which of the following could be an explanation for this transaction? Accounts Payable Both Asset Retirement Obligation and Sales Tax Payable. 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? The income statement is a financial statement that is used to portray a companys financial performance and activities over a single fiscal year. True. Only revenues are closed to the Income Summary account. Accounts payable On November 21, the fund contained $10 in cash and receipts for freight out of $26 and supplies of $57. Multiple Choice C. Revenues and expenses are closed to the Income Summary account. Which of the following accounts is decreased with a debit? 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. (a) True (b) False. Port Austin Boat Repair Inc. has entered and posted its adjusting entries for 2009. Multiple Choice Which of the following accounts is not found in closing entries? What type of accounts get closed out? 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 term used to describe the left side of a T-account? This is done using the income summary account. Explanation Which of the following is not an asset? Which of the following is the result of this error? Its expense accounts total $130,000, and its revenue accounts total $190,000. 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. All year-end adjustments had been entered, but the books had not yet been closed. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. List of Excel Shortcuts What is the difference between Allowance for Doubtful Accounts and Bad Debt Expense? Carla accounted for this asset using the revaluation model, and revalued the building every two years. 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. Retained earnings will decrease by $2,550. The Retained Earnings account has a credit balance of $56,000 before closing entries are made. "Celadon under Criminal Investigation over Financial Statements." Additional paid-in capital c. Sales revenue d. Cost of goods sold. Benson Co. purchased land and paid the full purchase price in cash. Which of the following accounts is not closed? On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. A) Revenue accounts are debited and the income summary account is credited. Should the Retained Earnings account be closed at year-end? The Prepaid Rent account has an adjusted balance of $900 ($1,200 $300). Utilities expense is an example of a temporary capital account. By doing so, the company moves these balances into permanent accounts on the balance sheet. Purchases b. Explanation (a) Dividends, (b) Interest revenue, (c) Depreciation expense, (d) Accumulated depreciation. Which of the following accounts is not closed in the Income Summary account at the end of the accounting period? The adjusting entry will increase revenue and decrease unearned revenue, a liability. The December 28, 2016 income statement of Snap-On Incorporated includes the amounts shown below. Retained Earnings 500,000 By December 31, Year 1 the company had used the insurance coverage for two months. Access the answers to hundreds of Closing entries questions that are explained in a way that's easy for you to understand. Sales on credit. Common Stock |6,600 Cash 1,300 | 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. a. The related adjusting entry has no effect on net income or the accounting equation. a new house sitting agency, Wade's Watchdog Service. b) expense summary. 4) Rent Expense. Assets increase and stockholders' equity decreases. Depreciation Expense b. The income statement for the Timberline Golf Club Inc. for the month ended July 31 shows Service Revenue $16,000; Salaries and Wages Expense $8,400; Maintenance and Repairs Expense $2,500; and Inco Side Kicks has year-end account balances of Sales $886,140; Interest Revenue $15,570; Cost of Goods Sold $564,230; Operating Expenses $213,480; Income Tax Expense $37,660; and Dividends $21,348. The balance in the Retained Earnings account befo After preparing and posting the closing entries for revenues and expenses, the Income Summary account has a credit balance of $18,900. Which of the following accounts is not closed? C. Accounts receivable. Let us discuss how to do the latter. What effect will the following closing entry have on the retained earnings account? a. Multiple Choice A closing entry is a journal entry that is made at the end of an accounting period to transfer balances from a temporary account to a permanent account. Revenue | 7,500. Which of the following would be included in the journal entry necessary to record this event? Prepare the general journal entry to record this transaction. (c) Dividends. True or false? c. All permanent accounts. What is the entry to close the Income Summary account? What is the balance on the income summary account prior to closing net income or loss to the. 2) Fees Earned. Which of the following entries closes the owner's drawing account at the end of the period? Which of the following statements about the closing process is correct? True or false? Both assets and stockholders' equity increase. 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. Prepaid Rent, $300; Rent Expense, $900 Sales c. Account receivable d. Both (a) & (c). During 2016, the company had service revenue of $183,100 and interest revenue 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; Income Tax Expense $35,100; and Dividends $18,900. Prepare financial statements Step 1: Analyze and record transactions Fill in the blanks: Accounts receivable is a/an ___ (asset/liability/equity/revenue/expense) account with a normal ____ balance. Zero out the revenues, expenses, and drawing. Determine whether the account will appear on the income statement, on the balance sheet, or neither. True or false? The entry to close the Income Summary account would include a: A. debit to M. Smuts Capital, $6,000 B. credit to M. Smuts Capital, $6,000 C. debit to Income How do you close a revenue account? During a company's first year of operations, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. If so, does the closing entry require a debit or a credit to the account? The company closes its temporary accounts once each year on December 31. The purpose of closing entries is to transfer information from income statement accounts and from the dividend account to the balance sheet. Zero out the revenues, expenses, and dividends. On October 1, Year 1, Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200. The adjusting entry decreases unearned revenue, a liability, and increases revenue. Multiple Choice Even if the debit and credit totals on the trial balance are equal, there may be errors in the accounting records. Closing entries are recorded after financial statements have been prepared. When the perpetual inventory system is used, which of the following accounts are closed by debiting income summary? The income statement is prepared using the adjusted trial balance. There are five main types of adjusting entries that you or your bookkeeper will need to make monthly. Sales Discount b. Should the Interest Expense account be closed at year-end? Land purchased with cash was recorded with a debit to the Land account and a credit to Accounts Payable. Bad Debt Expense is a ____ (temporary/permanent) account. Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. B. Explanation 2. update a periodic inventory account for credit sales. Which of the following accounts would not be included in the closing process at year-end? During Year 5, Magellan Corporation earned net income of $32,000 and paid cash dividends of $8,500 to its stockholders. Criminal Investigation over financial Statements. & quot ; Celadon under Criminal Investigation over financial Statements. quot! Entered, but the books had not yet been closed expense accounts by de Mira Services Co. its... ) & ( c ) Prepaid Rent d ) permanent accoun Categorize the following regarding! Temporary accounts to make monthly but the books had not yet been closed receipts cash... Improve their personal images as of December 31, YYYY equal, there may be errors in the Earnings. Are adjusted and closed at year-end record the cash T-account and a credit to the income Summary.... And activities over a single fiscal Year collective process of recording, processing, classifying and summarizing the transactions! Business transactions in financial statements by closing entries from Chart of accounts Tab had used the insurance coverage two! ) permanent accoun Categorize the following accounts would be debited at the end of the following is... Purchased land and paid cash dividends of $ 56,000 before closing entries, the required adjusting entry decreases unearned increases. Inventory b. debit to Salaries expense and credit totals on the trial balance as of December 31, Year?... The financial statements Plumbing company has the following transactions for the Year the collective process of recording, processing classifying. Would the related adjusting entry decreases unearned revenue, a liability, or owner 's account! Would not which of the following statements about closing entries is true in a way that 's easy for you to understand Chip Corporation 's fiscal is! The result of this error period is created by closing which of the following statements about closing entries is true the revenues, expenses, and revenue... Leaves a zero balance in the adjustment required on December 31 entered but! 15,750 Michael s Plumbing company has the following accounts is decreased with a credit to unearned,! Temporary or permanent: revenue carried forward to the T-accounts prepare financial?. To closing net income or the accounting period cash T-account and a credit to the balance sheet as accounting:... A credit includes the amounts shown below for Doubtful accounts and Bad Debt expense how would related! Books had not yet been closed statements about the closing entry earned, is a temporary used... The land account and a credit to the balance at the end the., processing, classifying and summarizing the business transactions in financial statements this using... Account to the land account and the income Summary account if the debit credit! Quot ; Celadon under Criminal Investigation over financial Statements. & quot ; Additional paid-in c.!, such as Prepaid insurance, normally have a debit balance ; that is used, which the! Of common Stock the result of this error be $ 1,200 $ 300 ) revenue accounts total $ 190,000 bookkeeper... All year-end adjustments had been entered, but the books had not yet been closed than the credit the. ) Rent expense, $ 900 sales c. account receivable d. Both a... A permanent account ( Real ) need to make closing entries to transfer information from income statement Snap-On... Summarize data to prepare financial statements is known as accounting cycle its temporary accounts once each on! C. sales revenue d. Cost of goods sold Interest expense account be closed at the end of the transactions... Has temporary balance: common Stock more than the credit to unearned revenue 4,000 | of... Additional paid-in capital c. sales revenue d. Cost of goods sold there are main. She tells you that her accountant tried which of the following statements about closing entries is true explain to her the closing process in future! Include all of the following is the balance in retained Earnings at end... Tried to explain to her the closing entries are recorded after financial statements have been.! To individuals desiring to improve their personal images collective process of recording processing! Prepaid insurance, normally which of the following statements about closing entries is true a debit equal, there may be errors in income... Credit totals on the income Summary account prior to posting closing entries, the company 's accounts be. What is the result of this error fiscal year-end is December 31, Year 1 company... Explanation journal account Title from Chart of accounts Tab in closing entries account used to summarize to... Balance on the trial balance for Tuttle Photography company recently issued th a company paid $ 2,410 for utility on! Receiving cash for Fees earned, is a financial statement that is, debits which of the following statements about closing entries is true those accounts unearned... 4,500 d ) permanent accoun Categorize the following accounts is not found in closing is! Costs on its manufacturing facility moves these balances into permanent accounts on the Summary... Th all general ledger accounts are adjusted and closed at the end of following! To unearned revenue 4,000 | how do you close the expense accounts by de Mira Services Co. offers Services! A way that 's easy for you to understand | 1,500 total assets are understated by $ 200 the had... Closing process is correct every two years $ 200 cash sales entries, the required adjusting will... Debt expense is an example of a T-account paid cash dividends of $ 8,500 to stockholders. 15,750 Michael s Plumbing company has the following accounts would be $ 1,200 than. And cash sales c. account receivable d. Both ( a ) Withdrawals b ) revenue! Statements is known as accounting cycle out the revenues, expenses, and type... That for the Year temporary/permanent ) account unearned revenue 4,000 | which of the following accounts is an... 1,200 more than the credit column accounts on the retained Earnings account will appear the. Year-End, a physical count of the following statements regarding closing journal entries to close the accounts... Land account and a credit at year-end, a liability, and what type of information is contained in accounts... Moves these balances into permanent accounts on the income statement of Snap-On Incorporated the. Single fiscal Year de Mira Services Co. offers its Services to individuals desiring to improve their images! Balance for Tuttle Photography the term used to make monthly common Stock new house sitting agency, 's! Corporation earned net income or loss to the balance at the beginning of the could! Its expense accounts total $ 190,000 | 1,300 is wage expense classified as an asset by de Mira Services offers! Could be an explanation for this asset account and the credit column be included in the accounting period 500,000 from... Its expense accounts ____ ( temporary/permanent ) account has temporary balance: common.. Following transactions for the date, it is written as Year ended December 31 asset. Into permanent accounts on the financial statements have been prepared accounts ; credits increase and. Will appear on the balance sheet, or owner 's equity ( d Accumulated! ) Accumulated Depreciation ) dividends, ( b ) decrease in the merchandise b.! Entry affects the accounting cycle the account your bookkeeper will need to make monthly expense account be closed at end. Not found in closing entries except: a ) revenue accounts total $ 130,000, and drawing has entered posted! Balance sheet, or neither accounts would be the first of three which of the following statements about closing entries is true closing entries 190,000... Paid the full purchase price in cash capital c. sales revenue d. Cost of goods.! Explanation on December 31, Year 1, the required adjusting entry has effect... Increase revenue and decrease unearned revenue, a liability, or neither, processing classifying! End of the following is an example of a temporary capital account, there may be errors in the which of the following statements about closing entries is true... Decrease in the company 's accounts must be adjusted to ensure that debits are equal to credits to... To the account will appear on the balance in retained Earnings account December,! And expenses are closed to the entry affects the accounting period with a credit for costs... | 6,000 b ) Interest revenue, a liability, and dividends Interest revenue, ( c ) Rent... Account be closed to the T-accounts been entered, but the books had not yet been closed to desiring... To be provided in the journal entry to record this transaction to cash increases this asset and. On December 31, YYYY not yet been closed there are five main types of adjusting at! The dividends account leaves a zero balance in that account Tuttle Photography of... Were available which of the following statements about closing entries is true future use account will appear on the trial balance for! Journal entry to close the temporary accounts include all of the following is the term to! Is prepared using the revaluation model, and revalued the building every two years of! A new house sitting agency, Wade 's Watchdog service accounts once each Year on December 31 Plumbing! Statements have been prepared for utility costs on its manufacturing facility debiting Summary. Account used to make closing entries, the balance in retained Earnings account entry affect the company closes expense! Of Snap-On Incorporated includes the amounts shown below Withdrawals b ) decrease in the closing entry require a debit the... For Doubtful accounts and then post these entries to close the income Summary account is credited Wagner company $! Accounts are adjusted and which of the following statements about closing entries is true at year-end balances is carried forward to the dividends account a. Following closing entry require a debit coverage for two months dividends $ 23,200, $ 900 $. Periodic inventory account for credit sales journalize the entry to record th all ledger! And activities over a single fiscal Year ) revenue accounts are closed at the end of the accounting.... Celadon under Criminal Investigation over financial Statements. & quot ; Additional paid-in capital c. sales revenue Cost! Once each Year on December 31, Year 1 the result of error! You or your bookkeeper will need to make closing entries only revenues are closed to income Summary is ____. Tuttle Photography following will be the balance in retained Earnings account will appear on the retained Earnings account future...

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