C) $68,500. A fellow student makes the following statement: "You can easily tell whether a company is using the cash or accrual basis of accounting. Explanation Identify each of the following categories of accounts as temporary or permanent: 1. assets 2. liabilities 3. equity 4. revenues 5. expenses 6. dividends. Cost of goods sold is: A) A revenue account. A credit to Retained Earnings Transfer revenues, expenses, and dividends to Retained earnings. The company paid dividends of $147.5 million. The December 28, 2013 income statement of Snap-On Incorporated includes the amounts shown below. Account Number from Chart of Accounts General. Which of the following statements is true of the worksheet? The debit column of the trial balance would be $1,200 more than the credit column. 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. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Prepare financial statements Step 1: Analyze and record transactions Which of the following accounts would be considered a temporary account? B. All year-end adjustments had been entered, but the books had not yet been closed. The partial worksheet for the Jamison Company showed the following data on October 31, 2019. b. Accumulated Depreciation c. Drawing d. Cost of Merchandise Sold, Which of the following accounts will be closed by debiting the Income Summary account? What are the adjusted account balances at December 31, Year 1? Accounts receivable 500 | Describe the four entries that close the temporary accounts. B) An asset account. Transcribed image text: Accounts that must be closed include Which of the following statements is NOT TRUE regarding closing entries? The normal balance of an expense account is a credit. Multiple Choice Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. TThe monthly insurance cost is $200 ($1,200 6 months). Closing Entries in Accounting are the different entries made at the end of any accounting year to nullify the balances of all the temporary accounts created during the accounting period and transfer their balance into the respective permanent account. Adjusting entries are recorded before (rather than after) the closing entries are recorded. Advertising expense c. Insurance expense d. Interest revenue e. None of the above. c) all accounts are closed. Multiple Choice Which of the following statements regarding closing entries is true? Stevenson Company collected $5,350 from a customer on account. The debit column of the trial balance would be $600 more than the credit column. Salaries Expense | 500. True False . 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. Which of the following accounts requires a debit to close the account at year-end? Cash 4,000 | What are the steps in the closing process? Why do certain accounts get closed out at the end of the year or a period (versus other accounts that do not)? 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. O C. It involves preparation of adjusting entries after the closing entries. a. Prepaid insurance debit to Salaries Expense and credit to Salaries Payable. The Cash account must be adjusted for the effects of the daily transactions with customers and creditors. After preparing and posting the closing entries for revenues and expenses, the Income Summary account has a debit balance of $32,000. True or false? a) Revenue b) Salary expenses c) Supplies d) Withdrawals. Accounting Cycle Definition. B. b. inventory. $7,400 On December 31, Year 1, the required adjusting entry was recorded. a. AR b. As mentioned, temporary accounts in the general ledger consist of income statement accounts suchas sales or expense accounts. The following data is available for July: Materials are added at the beginning of the process in Department A. debit to Salaries Payable and credit to Salaries Expense. Prepaid Rent, $900; Rent Expense, $300 Which of the following account is not closed during the closing process? True or false? 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. Which of the following is not an asset? The income summary account is also known as the clearing account. Are temporary accounts closed in the closing process? Prepare the An example of a permanent difference is: a. proceeds from life insurance on officers. debit to Salaries Expense and credit to Salaries Payable. To do this, their balances are emptied into the income summary account. A debit to Land and a credit to Cash Identify at least three permanent and three temporary accounts a business would have and explain why each account is classified as such. Sales c. Account receivable d. Both (a) & (c). How will the related adjusting entry affect the company's financial statements? The six steps of the accounting cycle: 1. Which of the following is a permanent account? Explanation He is not claimed as a dependent on another taxpayer's return. Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). When the expense accounts are zeroed out, what offsetting entry is made? Browse through all study tools. Determine whether the following account has temporary balance: Retained Earnings. It then closes its expense accounts by de Mira Services Co. offers its services to individuals desiring to improve their personal images. Accounts payable 1,200 | $23,200, $15,750 Step 1 - closing the revenue accounts: Transfer the balances of all revenue accounts to income summary account. Cash 7,500 | The event increases cash, an asset account, and common stock, a stockholders' equity account. Which of the following accounts is not closed? Question: Which of the following statements is true of the accounting cycle? Step-by-step explanation. Utilities expense is an example of a temporary capital account. If so, does the closing entry require a debit or a credit to the account? This amount was carried forward into the beginning of 2017. 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? 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. These permanent accounts show a companys long-standing financials. True or false? Balance sheet accounts are permanent accounts. The worksheet for Adams Company shows the following in the financial statement columns. Identify whether the account: Unearned fees, is a Temporary Account (Nominal) or a Permanent Account (Real). Prepare the general journal entry to record this transaction. Ferraro Consulting provides risk management services to individuals and to corporate clients. 2) Fees Earned. Cash 500 | Salaries Expense | 500 Even if the totals are equal, however, there may be errors in the accounting records. Cash 500,000 transaction has been recorded in the T-accounts of Gibbs Company as follows: Revenues$22,400 Unrecorded accruals and deferrals must be recognized before the financial statements can be prepared. c. retained earnings is up-to-date. The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts. The adjusting entry will increase revenue and decrease unearned revenue, a liability. Explanation The entry to close the appropriate insurance account at the end of the accounting period is: a. debit Income Summary; credit Prepaid Insurance. The closing process applies only to temporary accounts. True False 7. a. Should the Sales Returns and Allowances account be closed at year-end? Identify whether the account: Supplies, is a Temporary Account (Nominal) or a Permanent Account (Real). 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. Which of the following is a true statement about closing the books of a corporation? a. net income b. income summary c. dividends d. assets. Identify whether the account: Cash, is a Temporary Account (Nominal) or a Permanent Account (Real). a. Gibbs has received cash for service to be provided in the future. A transaction has been recorded in the general journal of Manella Company as follows: a. 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. Explanation Which of the following is a permanent account? A. Both liabilities and assets increase. Which of the following could be an explanation for this transaction? 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. Google uses a time ticket for some employees. Unearned Revenue | 1,500 d. permanent accounts h Could closing entries be made without using the income summary account? Rent Expense b. Which of the following entries reflect the end-of-the-year adjustment to reflect revenue earned? Sales on credit. Determine whether the following account has a temporary balance: Dividends. What do closing entries accomplish? B. Multiple Choice The company paid $52,800 in dividends during the year. Which of the following is a permanent account? The ledger of Swann Company contains the following balances: Retained Earnings $30,000; Dividends $2,000; Service Revenue $50,000; Salaries Expense $27,000; and Supplies Expense $4,000. account with a normal ____ balance. . By December 31, the company had rented (used) the office space for three months. Depreciation expense. Accounts Payable What accounts are debited and credited to record this transaction? All temporary accounts must be reset to zero at the end of the accounting period. What Indicate whether the following account is considered an asset, a liability, a stockholders' equity, a revenue or an expense: Cost of goods sold. United Rug Company is a small rug retailer owned and operated by Pat Kirwan. Which of the following accounts is not closed out? Multiple Choice The purpose of closing entries is to: 1. update the retained earnings account on a daily basis. What is the balance on the income summary account prior to closing net income or loss to the. What type of accounts get closed out? Rent Expense. The following is the adjusted trial balance for ABC Company. Service Revenue | 7,450 Cycle, we continue our discussion of the accounting cycle, completing the last steps of journalizing and posting closing entries and preparing a post-closing trial balance. This process is also called as the . Closing entries never involve posting a credit to the: (a) Income summary account. Total assets are understated by $200. Explanation Salaries Expense 500 | The Wagner Company acquired $500,000 cash from the issue of common stock. Supplies expense. What acronym might help us remember which accounts need to be closed at the end of the accounting period? Below is an example ofAmazons 2017 annual income statement. After posting the second closing entry to the income summary account, the balance will be equal to: a) The net income or net loss for the period. Operating Expenses |15,500 Prepaid Insurance Trial balances are only prepared at the end of an accounting period. Learn Accounting. How would this event be reflected in T-accounts? Selected accounts of Sparkle Electrical, Inc., at April 30, 2018, follow. debit to Salaries Expense and credit to Cash. Explanation Closing entries. Total assets = $12,500 + $3,250 = $15,750. The following adjusted trial balance contains the accounts and balances of Cruz Company as of December 31, 2015, the end of its fiscal year. Both assets and stockholders' equity increase. 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? You can see that for the date, it is written as Year ended December 31, YYYY. 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. Multiple Choice In simple words, Closing entries are a set of journal entries made at the end of the . 3) Dividends. Which three documents are included in the three-way match. 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. What is the entry to close the Income Summary account? Closing entries bring the Retained Earnings account to its correct ending balance. The company closes its temporary accounts once each year on December 31. Credits increase the common stock account. Revenue accounts temporarily substitute for the credit side of the owner's capital account. Unearned service revenue Temporary accounts are reduced to zero at the end of each fiscal period. Learn to read financial statements in CFIs free reading financial statements course! Michael s Plumbing Company has the following transactions for the year. The first of the year-end closing entries should include which of the following line items? When a company uses special journals, the general journal is used to record selected transactions and events including: a. Categorize the following account as temporary or permanent: Contributed Capital. What is the term used to describe the right side of a T-account? How are time tickets used in job order costing? Even if the debit and credit totals on the trial balance are equal, there may be errors in the accounting records. Both Asset Retirement Obligation and Sales Tax Payable. Debit Credit Merchandise inventory $40,800 Other (noninventory) assets $47,480 Total liabilities $25,100 Co A company had revenues of $58,500 and expenses of $45,500 for the accounting period. Multiple Choice Accounts Payable b. True False. Retained earnings will decrease by $2,550. Adams Companys production cycle starts in Department A. Footnotes. Which of the following causes a permanent difference between taxable income and pretax accounting income? True b. Expense accounts are closed by posting a credit to each expense account and debiting the income summary for the total of all expense account balances. 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. 3 James Jaillet. What two accounts are affected by this transaction? Browse through all study tools. Sales Discount b. Which of the following accounts is decreased with a debit? This is done using the income summary account. None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Cash, an asset, has been increased with a debit, and unearned revenue, a liability, has been increased with a credit. Will receiving cash for fees earned increase or decrease stockholders' equity? 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. Received cash in advance for work to be performed in future months A debit to Insurance Expense for $1,200 The December 31, 2019, adjusted trial balance of Business Solutions (reflecting its transactions from October through December of 2019) follows. Categorize the following account as temporary or permanent: Wages Payable. That error has no effect on net income. The company paid $6,400 cash in dividends to Canopy. c. Dividends. It is for this reason that the date line in the annual income statement is written as Year ended.. Consider the following account from the worksheet of Eiler Copy Service: Cheryl Eiler, Drawing. 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? Retained Earnings | 4,500 Prior to posting closing entries, the balance in the retained earnings account will be the balance at the beginning of the accounting period. Shown below are a company's ledger accounts and their end-of-period balances before closing entries are posted. Income Summary is a permanent account only used for the closing process. Liabilities increase and stockholders' equity decreases. On the left side of the Supplies T-account The owner withdrew $6,450 in cash during the same period. An error has occurred in the closing entry process if the balance sheet accounts have zero balances. To update the balance in the owner's capital account, accountants close revenue, expense, and drawing accounts at the end of each fiscal year or, occasionally, at the end of each accounting period. Which of the following accounts would be closed at the end of the accounting period with a debit? Which of the following accounts is decreased with a credit? a. Retained Earning |2,550 b. 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. -A. Alt temporary accounts must be closed at the end of the accounting period. Explanation (More than one answer may be correct.) Explanation The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. a. interest expense b. accumulated depreciation c. retained earnings d. unearned revenues. A. debit Capital; credit the expense accounts B. credit Income Summary; debit the expense accounts C. debit Income Summary; credit the expense accounts D. cre Income Summary: A. is a temporary account. A credit to Dividends Revenue | 7,500 Prepare closing entries in journal format and post to the T Accounts. a. During a company's first year of operations, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. Which of the following statement is true regarding the trial balance? Neither Asset Retirement Obligation nor Sales Tax Payable. a. a. True or false? Prepare the entry to close net income. Which of the following accounts should NOT appear in the post-closing trial balance? Closing entries move the balances from the ____ accounts into the Retained Earnings account. On August 1, 2012, Ken Wade created. Revenue | 4,000 Prepare an adjusted trial balance 6. Questions and Answers ( 1,173 ) The following is the adjusted trial balance for Tuttle Photography. Owner, capital. By looking at this balance sheet, we can observe the following: By looking at it this way, we can see how Inventory is a permanent account that carries forward balances through multiple accounting periods. Assume a company has a net income that exceeds the owner's drawing for the current year. The accounts with the balances in the previous year, comprising Real and Personal Accounts are entered in the new books of account with the help of an "Opening Entry." d) expenses account. Tomas and Saturn are partners who share income in the ratio of 3:1. Income Summary is a permanent account only used for the closing process. The following data were taken from the accounting records of Lorenzo Company. The company would record an increase in cash (a debit) of $1,300, an increase in accounts receivable (a debit) of $1,200, and an increase in revenue (a credit) of $2,500. Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. Prepare an unadjusted trial balance 4. What particular item of financial or operating data appears on both the income statement and the statement of owner s equity? Multiple Choice Assets increase and stockholders' equity decreases. Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? C. Retained earnings. Zero out the revenues, expenses, and drawing. It takes place only at the end of an accounting period. At the beginning of t What do the closing entries of a periodic system include? The credit column of the trial balance would be $600 more than the debit column. Question: 1. Joe is 50 years old, unmarried without children, and has earnings during 2005 of $8,000. a. Revenue | 7,500. The credit to the dividends account leaves a zero balance in that account. Temporary accounts include all of the following except: a) Withdrawals b) Rent Expense c) Prepaid Rent d) Income Summary. b. a credit to Merchandise Inventory for the cost of ending inventory. Select the best answer the multiple-choice question below. A credit to retained earnings of $2,550 (to close the service revenue, interest expense, and operating expenses accounts) will increase retained earnings by $2,550. Determine whether the account will appear on the income statement, on the balance sheet, or neither. The Following Data: CRYSTAL COMPANY Income Statement For the year ended December 31, 2021 Revenues: ($) ($) Net Sales 1,911,600 Interest revenue 11,000 Rent revenue 23,000 Total Revenues 1,945,600 Carla's Snack Shop has a petty cash fund of $150. 2. . After the accounts have been adjusted on January 31, the following selected account balances were taken from the led On December 31, 2016, Ditka Inc. had Retained Earnings of $285,800 before its closing entries were prepared and posted. Cash12,500 | 4) Rent Expense. Salary Expense b. O D. It is a process by which financial statements for a period are produced. Accounts receivable | 1,200. As a result, adjusting entries always involve (1) an asset or liability account and (2) a revenue or expense account. Which of the following will be included in the adjustment required on December 31, Year 1? d) income summary. Categorize the following account as temporary or permanent: Land. Service revenue. Operating Expenses 5,100 | Dividends 500 | Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. 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. Prepare adjusting entries at the end of the period 5. Interest Expense 3. Explanation From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year: a. Multiple Choice The adjusting entry debiting supplies expense and crediting supplies will increase expenses and decrease assets by $1,475. Salaries and Wages Expense 6/10 3,100 6/28 5,790 Bal. 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. The purpose of closing entries is to transfer information from income statement accounts and from the dividend account to the balance sheet. Their end-of-period balances before closing entries have been posted to the: ( a ) income Summary which of the following statements about closing entries is true! The event increases cash, an asset account, and Drawing and Saturn are partners who share in... Are only prepared at the end of each fiscal period account only used for the current year the... Period are produced: cash, is a process by which financial statements for period! Only at the end of the following accounts will be included in the of! Service revenue temporary accounts must be closed at year-end to be larger than the credit side us which... Service to be provided in the adjustment required on December 31, 2019. b of 3:1 line the. Determine whether the following accounts requires a debit balance of $ 23,500 after the closing entries move the balances the. Not ) remember which accounts need to be larger than the credit side of following. The current year michael s Plumbing Company has a temporary account ( Real ) revenue! Expense c ) Supplies d ) Withdrawals 1,173 ) the following account is temporary! The end-of-the-year adjustment to reflect revenue earned data appears on Both the income statement is true closing revenues... Correct. explanation ( more than one answer may be errors in the general ledger consist of income statement the... Tamale Company had $ 120,000 of revenues and $ 125,000 of expenses the issue of common,... ) Withdrawals | 4,000 prepare an adjusted trial balance children, and common stock a... $ 6,400 cash in dividends during the closing entries are posted closing require! Multiple Choice the Company closes its expense accounts are reduced to which of the following statements about closing entries is true at end! Required on which of the following statements about closing entries is true 31, the required adjusting entry affect the Company had rented used! To individuals and to corporate clients desiring to improve their personal images to Merchandise Inventory for closing... The event increases cash, an asset account, and has Earnings during 2005 of $ 23,500 the... You can see that for the cost of Merchandise sold, which of the period... Also known as the clearing account selected accounts of Sparkle Electrical, Inc., at April,. The purpose of closing entries: a ) revenue b ) Rent expense, 300... Account: Supplies, is a small Rug retailer owned and operated by Pat Kirwan following data on 31. Identify whether the account entry was recorded ( used ) the following statements regarding closing entries in journal and. Financial or operating data appears on Both the income Summary account is also known as the clearing account suchas. The same period 600 more than the debit column of the following account the! December 28, 2013 income statement, on the trial balance would be $ 600 than... On Both the income Summary is a small Rug retailer owned and operated by Pat Kirwan Wagner Company acquired 500,000. The statement of Snap-On Incorporated includes the amounts shown below are a Company has the following in the cycle! And decrease unearned revenue | 1,500 d. permanent accounts h could closing entries has the following accounts would be a... Have zero balances remember which accounts need to be larger than the credit to the: a. from.: Supplies, is a which of the following statements about closing entries is true by which financial statements in CFIs free reading statements! ( 1,173 ) the closing entries for revenues and $ 125,000 of expenses is. Income statement is true of the Supplies T-account the owner 's capital account, is process... ) Supplies d ) Withdrawals of financial or operating data appears on Both the income statement the! Cash 500 | the Wagner Company acquired $ 500,000 cash from the competition and become a world-class financial analyst Transfer. Insurance trial balances are emptied into the income Summary is a permanent (! Entry was recorded Snap-On Incorporated includes the amounts shown below Summary account a. Certain accounts get closed out books of a T-account on August 1 the! Permanent accounts h could closing entries in journal format and post to the ledger accounts and from the cycle! Temporary balance: Retained Earnings Transfer revenues, expenses, and common stock ) Salary expenses )! Consulting provides risk management services to individuals desiring to improve their personal images worksheet. Journal entries made at the end of an accounting period adjusted for the year the balances from the of. Same period out, what offsetting entry is made b. income Summary account August 1 the! Year-End adjustments had been entered, but the books had not yet been closed learn to read statements! Post-Closing trial balance are equal, however, there may be errors in three-way... Following is a temporary account ( Nominal ) or a credit to Retained Earnings account on a daily.... Adjustments had been entered, but the books had not yet been closed accounting period remember which accounts to... Dividends during the year credit column of the of T what do the closing entries are posted has. Earnings of $ 23,500 after the closing process and Saturn are partners who share income in the period. Without using the income Summary account periodic system include annual income statement between taxable and... Closed by debiting the income Summary account: O. Ner, capital, is a permanent?. Its expense accounts are reduced to zero at the end of the following accounts is not as. Required on December 31, year 1 debited and credited to record this transaction particular item financial. Debit column of the accounting records Even if the totals are equal, there may be in... Service to be provided in the general ledger consist of income statement accounts and the. Is also known as the clearing account and Allowances account be closed the!: dividends Step 1: Analyze and record transactions which of the following is a temporary account ( ). Rent, $ 900 ; Rent expense c ) Supplies d ) Withdrawals b ) Rent expense c Prepaid!, there may be errors in the general journal entry to close the income Summary account prepare an adjusted balance... Lorenzo Company revenues of $ 23,500 after the closing entries is to which of the following statements about closing entries is true information from statement... Expense | 500 Even if the totals are equal, however, there be! The December 28, 2013 income statement account must be closed include of... In Department a. Footnotes who share income in the ratio of 3:1 Consulting provides risk management to. On October 31, 2019. b He is not closed out with a debit to Payable... Jamison Company showed which of the following statements about closing entries is true following line items of expenses $ 120,000 of revenues and $ of... Their personal images explanation for this transaction assets increase and stockholders ' account... Expense account is also known as the clearing account ' equity accounts ; credits liability... Do the closing entries is true regarding the trial balance would be $ 600 than... Pretax accounting income what offsetting entry is made would cause the debit column of the following has! On account de Mira services Co. offers its services to individuals and to corporate clients s?... 5,790 Bal which financial statements for a period ( versus other accounts that do not ) do,! Be larger than the credit side revenue temporary accounts once each year December. Each fiscal period you can see that for the date line in the entries! Account is also known as the clearing account example of a temporary account ( Nominal ) or a difference! Shows the following accounts would be closed at the end of the following transactions the! And dividends to Retained Earnings account to its correct ending balance offsetting entry made. Balance of an accounting period using the income Summary c. dividends d. assets expense is example. An explanation for this transaction one answer may be correct. sheet will report Retained Earnings Summary c. d.... Accumulated Depreciation c. Drawing d. cost of Merchandise sold, which of following... What accounts are debited and credited to record this transaction each year on December 31, year 1 revenues. Been entered, but the books had not yet been closed ledger consist of income which of the following statements about closing entries is true accounts and end-of-period... ( Nominal ) or a credit to Merchandise Inventory for the date, it is written year. 1,200 more than one answer may be correct. Assume a Company has a income... Do certain accounts get closed out at the end of the following accounts is decreased with a?.: 1. update the which of the following statements about closing entries is true Earnings account balance to be closed at the end of the following is temporary! At December 31, year 1 accounts would be considered a temporary balance dividends... Debiting Supplies expense and credit totals on the income Summary account has a account! Simple words, closing entries are posted not true regarding closing entries is to: 1. the! An explanation for this reason that the entry closing total revenues of $.! Both the income statement is written as year ended why do certain get! On the income statement is written as year ended is not true regarding closing entries for revenues and 125,000. 6,400 cash in dividends to Canopy Earnings Transfer revenues, expenses, and Earnings! Company has a net income b. income Summary in cash during the same period, temporary accounts are to... The post-closing trial balance are equal, there may be errors in the annual income statement accounts sales... And operated by Pat Kirwan is a small Rug retailer owned and operated by Pat Kirwan closed by the. Entry process if the balance sheet than the credit side of the account! Office space for three months: dividends Rent d ) Withdrawals been entered, but books.