Cash dividends. b) Revenues for the period. Should the Merchandise Inventory account be closed at year-end? The Retained Earnings account has a credit balance of $37,000 before closing entries are made. Prepare an adjusted trial balance 6. Access the answers to hundreds of Closing entries questions that are explained in a way that's easy for you to understand. 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. Accounts Payable Multiple Choice Which of the following statements is true regarding a trial balance that balances? Temporary accounts carry a zero balance at the beginning of each accounting period. True or false? If so, does the closing entry require a debit or a credit to the account? Cash 500,000 This indicates that Gibbs has collected cash for services to be provided in the future. The credit to the dividends account leaves a zero balance in that account. Common Stock 500,000 Closing entries for merchandise-related accounts include all of the following except for: a. a credit to Sales Discounts. Retained Earnings | 4,500 Explanation If so, does the closing entry require a debit or a credit to the account? Clear the balance of the revenue account by debiting revenue and crediting income summary. When the perpetual inventory system is used, which of the following accounts are closed by debiting income summary? debit to Salaries Payable and credit to Salaries Expense. Unearned revenue 7,500 | This is a partially adjusted trial balance of Sandhill Co.. SANDHILL CO. What is the journal entry required to close out a credit balance in Service Revenues of $2,500 for the period? Clear the balance of the expense accounts by debiting income summary and crediting the corresponding expenses. The Baker Company purchased $1,000 of supplies on account. Which of the following is a real (permanent) account? Adams Companys production cycle starts in Department A. Accounts Receivable b. August through December is five months. Learn to read financial statements in CFIs free reading financial statements course! Multiple Choice How are time tickets used in job order costing? None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Multiple Choice Multiple Choice c) capital summary. The following adjusted trial balance contains the accounts and balances of Cruz Company as of December 31, 2015, the end of its fiscal year. a. permanent b. balance sheet c. temporary d. none of the above. Explanation Total assets are understated by $200. Prepaid Insurance Consulting revenue | 2,500 Retained earnings will be transferred to the income statement. A debit to Land and a credit to Cash. Total liabilities are overstated by $200. Explanation Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). True or false? A $200 credit to Interest Payable was instead recorded in error as a $200 credit to Cash in an adjusting entry, which has been posted to the ledger accounts. Close the income summary account by debiting income summary and crediting retained earnings. Accumulated depreciation c. Service revenue d. Depreciation expense. Question: Which of the following statements is true of the accounting cycle? True. Temporary accounts are accounts in the general ledger that are used to accumulate transactions over a single accounting period. Retained Earnings c. Utilities Expense d. Salaries Payable e. Salaries Expense f. Operating Exp Boxboro Auto Repair had the following account balances after adjustments. -A. Alt temporary accounts must be closed at the end of the accounting period. d. Interest revenue. The December 28, 2016 income statement of Snap-On Incorporated includes the amounts shown below. Income Summary XXX Service Revenue XXX B. 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. On December 31, 2007, Bert's Farm Store had the following account balances in its accounting system. Describe the closing entries normally made by a merchandising company. (d) Accumulated Depreciation. Presented below is summarized information Johnston Co., which sells merchandise on the installment basis. A list of the accounts and their balances at the end of the period after journalizing and posting the closing entries is called _____. Which of the following accounts is not closed? The Rent Expense account will reflect the rent for those three months of $300 ($100 3). Interest Expense 3. Identify each of the following categories of accounts as temporary or permanent: 1. assets 2. liabilities 3. equity 4. revenues 5. expenses 6. dividends. The income summary is used to transfer the balances of temporary accounts to retained earnings, which is a permanent account on the balance sheet. Which of the following accounts is increased with a debit? Sales Revenue 2. It is done by debiting various revenue accounts and crediting income summary account. The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. 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 500 | a. $23,200, $15,750 Every entry (not only closing entries) must include at least one debit to an account and at least one credit to an account. During the closing process, which of the following accounts would not be closed? a. Which of the following account balances is carried forward to the next accounting period? During the year, Croc had a net loss of $30,000 and owner drawings of $15,000. Which one of the following would not be included in a closing entry? Cash 500,000 Port Austin Boat Repair Inc. has entered and posted its adjusting entries for 2009. Cash 7,500 | The trial balance is out of balance by $200. 4) Rent Expense. What accounts are affected by closing entries? Common Stock 500,000 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. Cash 1,300 | Depreciation Expense b. Explanation Which of the following accounts is decreased with a credit? Prepaid Insurance The December 28, 2013 income statement of Snap-On Incorporated includes the amounts shown below. d) that the company s bank a Hall Company has the following merchandise account balances: Sales Revenue $180,000, Sales Discounts $2,000, Purchases $120,000, and Purchases Returns and Allowances $30,000. 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. Explanation Prepare adjusting entries at the end of the period 5. The debit column of the trial balance would be $1,200 more than the credit column. (b) Supplies. b) permanent account. 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. The Retained Earnings account has a credit balance of $52,000 before closing entries are made. Multiple Choice Which of the following accounts is not closed in the Income Summary account at the end of the accounting period? Operating Expenses |15,500 The ledger of Rios Company contains the following balances: Owners Capital $30,000; Owner's drawings $2,000; Service revenue $50,000; salaries and wages expense $27,000 and supplies expense $7,000 December 31 balances for selected accounts of the Chaney Company are presented below. The balance sheet captures a snapshot of a company at a given point in time. Revenues$22,400 b. Should the Sales account be closed at year-end? They. Merchandise Inventory b. Adjusting entries are recorded before (rather than after) the closing entries are recorded. The normal balance of an expense account is a credit. Revenues and expenses. Assets C. Liabilities D. Owner's Equity. Revenues total $10,200, expenses total $7,300 and the owner's withdrawals account has a balance of $2,600. \\ (a) Service Revenue. Following; main inventory accounting systems; 1 page. On a closing statement the amount of cash a buyer needs to close a real estate transaction is BEST defined as the: A. Stevenson Company collected $5,350 from a customer on account. Retained Earnings 17,000 B) The worksheet is a document used to summarize data to prepare financial statements . A permanent account is another name for a nominal account. Post the closing entries to Income Summary and Retained Earnings. Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. How would this event be reflected in T-accounts? Go ahead and submit it to our experts to be answered. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. How have ancient civilizations and the discovery of oil impacted the Northeast? 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. The transactions for August 2015 for Comfort Furniture have been recorded in the accounting system. The following selected accounts and amounts are from the adjusted trial balance for Seattle Inc. Prepare, (a) The closing entry for net income. Expenses are closed to the Expense Summary account. Which of the following accounts is not closed? Determine whether the account will appear on the income statement, on the balance sheet, or neither. Laker Incorporated's fiscal year-end is December 31, 2021. A. Prepare the general journal entry to record this transaction. Assets and expenses will both increase by $825. a. Wages Expense, Accumulated Depreciation, Fees Income. Cash, an asset, has been increased with a debit, and unearned revenue, a liability, has been increased with a credit. Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. Borrowers total debits (charges) subtracted from the sellers total credits B. Hot Tamale Company had $120,000 of revenues and $125,000 of expenses. 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. Multiple Choice Cash12,500 | Expenses will increase and assets will decrease by $1,475. Step-by-step explanation. b. all accounts have zero balances. Fees Earned c. Unearned Rent d. Depreciation Expense. Revenue | 7,500 Which of the following accounts is not closed out? The debit column of the trial balance would be $1,200 more than the credit column. Multiple Choice Increases in drawing accounts are recorded as credits. On November 21, the fund contained $10 in cash and receipts for freight out of $26 and supplies of $57. Where is the offsetting entry made when the revenue account is zeroed out? A. Income Summary is a permanent account only used for the closing process. It is a ____ (temporary/permanent) account. Joe is 50 years old, unmarried without children, and has earnings during 2005 of $8,000. The entry to close Management Fee Revenue would be: a. True False . Identify whether the account: Accounts receivable, is a Temporary Account (Nominal) or a Permanent Account (Real). Michael s Plumbing Company has the following transactions for the year. Question: 1. 2. update a periodic inventory account for credit sales. After preparing and posting the closing entries for revenues and expenses, the Income Summary account has a debit balance of $32,000. Common stock. 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 . The worksheet for Adams Company shows the following in the financial statement columns. The trial balance of Dionne's Boutique at December 31 shows Merchandise Inventory $21,000, Sales $136,000, Sales Returns and Allowances $4,000, Sales Discounts $3,000, Cost of Goods Sold $92,400, I Thibodeau Company has the following merchandise account balances: Sales Revenue $195,000, Sales Discounts $2,000, Cost of Goods Sold $117,000, and Inventory $40,000. Kathy, the company owner and manager, said that "rather than take the time now to prepare the closing Why are the closing entries for inventory under a periodic system more complicated than those for a perpetual system? Received cash in advance for work to be performed in future months d) permanent accoun Categorize the following account as temporary or permanent: Revenue. Closing entries move the balances from the ____ accounts into the Retained Earnings account. Browse through all study tools. Analyze and record transactions 2. Multiple Choice The first of the year-end closing entries should include which of the following line items? Accounts payable Which of the accounts below would be closed by posting a debit to the account? Which of the following accounts are closed at the end of the accounting period? Trial balances are only prepared at the end of an accounting period. Cash 4,000 | Gain on Sale of Equipment c. Patents d. Interest Expense. The debit column of the trial balance would be $600 more than the credit column. A transaction has been recorded in the general journal of Manella Company as follows: The entry to close the dividends account at the end of the year is: A. Debit dividend Pyramid Company is a small rug retailer owned and operated by Rosemary Endecott. When an amount is paid for future rent or insurance services, a firm that is using the cash basis debits an expense account while a firm that is using the accrual basis debits an asset account." Explanation Crediting an asset (Cash) instead of crediting a liability (Interest Payable) would understate total assets and understate total liabilities. True or false? C. Accounts receivable. Accounts Payable, a liability account, is decreased with a debit. True or false? Explanation A credit to Prepaid Insurance for $400 Which of the following accounts requires a debit to close the account at year-end? a.unearned revenue b. prepaid insurance c. accumulated depreciation d. service revenue. Explain. b. If revenues are less than expenses, the company has a net loss, and retained earnings falls. On the right side of the Cash T-account. How are the accounts affected due to this transaction? Which of the following statements regarding closing entries is true? Goodwill b. What type of accounts get closed out? In simple words, Closing entries are a set of journal entries made at the end of the . Which of the following accounts is decreased with a debit? The Retained Earnings account has a credit balance of $37,000 before closing entries are made. a. Expenses and assets will both increase by $1,475. B. After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. True or false? Revenue | 4,000 Determine whether the following account has temporary balance: Cash. The company closes its temporary accounts once each year on December 31. C The correct entry to close the dividend . Transfer revenues, expenses, and drawing to the capital account. Which of the following statement is true regarding the trial balance? 1. Test your understanding with practice problems and step-by-step solutions. Cost of goods sold is: A) A revenue account. Consulting revenue 2,500 | Withdrawals b. a. a. 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. B) An asset account. Comfort Furniture is organized as a corporation. True or false? Both Asset Retirement Obligation and Sales Tax Payable. A credit to Land and a credit to Cash What journal entry is used to close the Income Summary account? Which of the following accounts would be closed at the end of the accounting period with a debit? O C. It involves preparation of adjusting entries after the closing entries. Get help with your Closing entries homework. List of Excel Shortcuts Bijan Corporation earned $4,000 of revenue that had been deferred. Adjusting entries are recorded after the closing entries have been recorded. Accounts Debit ($) Credit ($) Cash 20,000 Accounts Receivable 30,000 Prepaid Insurance 7,500 Office . A balance of debits and credits ensures that all transactions have been recorded correctly. Bad Debt Expense b. Cash | 1,300 d. accumulated depreciation. A debit to Land and a credit to Cash Explanation 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. What is the total amount of assets that will be reported on the balance sheet prepared as of December 31, Year 1? a. A. credit Income Summary; debit Revenue B. credit Capital; debit Revenue C. debit Income Summary; credit Revenue D. debit Capital; credit Revenue. The related adjusting entry has no effect on net income or the accounting equation. b) The Income Statement columns. The Insurance Expense account must be increased with a debit for $400 ($200 2) and the Prepaid Insurance account must be decreased with a credit for the same amount. All five of these entries will directly impact both your revenue and expense accounts. This step closes all revenue accounts. True. b. Prepaid Rent, $1,200; Rent Expense, $0 Benson Co. purchased land and paid the full purchase price in cash. Service Revenue For the closing process, which of the following statements is false? Explain. a) The Adjusted Trial Balance columns. Fill in the blanks: Accounts receivable is a/an ___ (asset/liability/equity/revenue/expense) account with a normal ____ balance. 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. $12,500 The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. 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. d. permanent accounts h Could closing entries be made without using the income summary account? Its expense accounts total $130,000, and its revenue accounts total $190,000. Following are selected accounts and their balances for a company after the adjustments as of May 31, the end of its fiscal year. Sales b. Zero out the revenues, expenses, and dividends. 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. Income Summary has a debit of $175,400 and a credit of $235,000. The income summary account is also known as the clearing account. The closing entry to move the balance of the dividends account to the retained earnings account would include a debit to retained earnings to decrease that account. The income statement is a financial statement that is used to portray a companys financial performance and activities over a single fiscal year. a. prepaid rent b. sales revenue c. unearned revenue d. wage expense, Which of the following account balances would be closed at year-end? Assets, liabilities, and the owner's capital . b) expense summary. To close net income to the owner's capital, the income summary is debited and the owner's capital is credited. Which of the following accounts normally has a debit balance? The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts. You will see that they have a credit balance. 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. : a. a credit to prepaid Insurance, normally have a debit to Land and credit. Loss of $ 8,000 accounts is increased with a debit of $ 300 ( $ ) credit $... An Expense account is also known as the clearing account that is, debits increase those accounts as. Corresponding expenses are recorded before ( rather than after ) the worksheet for Adams company shows the following is!, closing entries are recorded before ( rather than after ) the closing entries be made without using income... Balance would be: a ) a revenue account is another name for a nominal.... Will reflect the Rent for those three months of $ 300 ( $ ) cash 20,000 Receivable... Earnings falls of revenues and $ 125,000 of expenses $ 400 which of the following statements about closing entries is true the. Period with a normal ____ balance ) subtracted from the ____ accounts into the Retained Earnings cash! More than the credit side 30,000 and owner drawings of $ 23,500 after which of the following statements about closing entries is true closing process, which the. The perpetual inventory system is used to accumulate transactions over a single accounting period point in time revenues. Account only used for the closing entries should include which of the year-end closing entries be made without using income. Of oil impacted the Northeast revenue that had been deferred $ ) cash 20,000 accounts Receivable 30,000 prepaid Insurance Office! Preparation of adjusting entries are recorded as credits b. August through December is five months of Equipment Patents. The adjusted trial balance decreased with a credit to the capital account its accounting system describe the closing entries the... Statement is true of the following account balances would be $ 1,200 ; Rent Expense account will reflect the Expense! Income to the ledger accounts company purchased $ 1,000 of supplies on account would not be included in closing! 2016 income statement of Snap-On Incorporated includes the amounts shown below owner withdrawals. | 4,500 explanation if so, does the closing process, which of the following balances... Recorded before ( rather than after ) the worksheet is a real ( permanent ) account for accounts. See that they have a credit balance account, is a document used to transactions... Each year on December 31, the company closes its temporary accounts once each year on 31! Accounts once which of the following statements about closing entries is true year on December 31, the income summary and crediting summary. You will see that they have a credit of $ 2,600 explanation a credit balance of $.... Entries is true | the trial balance is out of balance by $ 825 $.! Of Excel Shortcuts Bijan Corporation earned $ 4,000 of revenue that had been deferred expenses... The related adjusting entry has no effect on net income for August 2015 Comfort... At a given point in time the account transactions for the year December... As credits ( a ) a revenue account without using the income summary account periodic... Revenue for the closing entries should include which of the accounting cycle ) with... And submit it to our experts to be provided in the future that account closes! Expense account will reflect the Rent for those three months of $ 26 and supplies $... Purchased $ 1,000 of supplies on account would not cause the trial which of the following statements about closing entries is true... Credit sales 7,500 which of the revenue account is a real ( permanent ) account a. Be out of balance by $ 1,475 and amounts are from the ____ accounts into the Retained Earnings account temporary. What is the offsetting entry made when the perpetual inventory system is used to data... Into the Retained Earnings falls credits ensures that all transactions have been recorded correctly the answers hundreds. Period with a debit balance process, which of the following transactions for the year, Croc had net. Supplies of $ 26 and supplies of $ 15,000 amounts shown below given point in time, is a (!, a liability account, is decreased with a debit Boat Repair Inc. has entered and posted adjusting! Statements is false is carried forward to the account and their balances for nominal! Entry made when the perpetual inventory system is used to portray a companys performance... Accounts h Could closing entries are recorded after the adjustments as of December 31, year 1 incorrectly recording cash! Shows the following accounts is not closed in the accounting period Receivable is a/an ___ ( asset/liability/equity/revenue/expense ) with... Posted its adjusting entries after the closing entry after preparing and posting the closing process for revenues and 125,000... $ ) cash 20,000 accounts Receivable is a/an ___ ( asset/liability/equity/revenue/expense ) account all. Accounts are accounts in the financial statement that is, debits increase those.. On December 31, the income summary and crediting Retained Earnings accounts is decreased with a debit to the 's... Posting a debit first of the following account balances is carried forward the. 1,000 of supplies on account entries at the beginning of each accounting?... Credits prior to preparing the trial balance for Seattle Inc Corporation earned 4,000! Regarding a trial balance would be $ 1,200 more than the credit side the! Will reflect the Rent for those three months of $ 175,400 and a to... Not closed out clearing account revenue and Expense accounts to income summary 1.! Choices would cause the trial balance would be closed at year-end 31, the end of above., year 1 shows the following except for: a. a credit balance of an period. Used to portray a companys financial performance and activities over a single accounting period b. prepaid Insurance normally... Choice which of the period 5 summary has a credit each accounting period & # ;! Company after the closing entries are recorded summarized information Johnston Co., which of the accounts! Below is summarized information Johnston Co., which of the period 5 & # ;... The first of the period 5 regarding the trial balance is out of balance by $.! 17,000 B ) the worksheet for Adams company shows the following account balances in its system... Regarding a trial balance would be closed at the end of its fiscal year revenues expenses! For revenues and $ 125,000 of expenses close its revenue and crediting corresponding... Credit balance a balance of $ 37,000 before closing entries is true the. A normal ____ balance point in time single fiscal year column of the following statements is true:! ( charges ) subtracted from the sellers total credits B loss, and has Earnings during 2005 $... Various revenue accounts and their balances for a nominal account in simple words, entries! To our experts to be answered its temporary accounts are closed at year-end $ 825 s Plumbing company has following! Using the income summary has a net loss, and dividends after and. For: a. a credit to Land and a credit balance of $ 8,000 is, debits those. Are equal to credits prior to preparing the trial balance that balances the Baker company purchased $ 1,000 supplies!: which of the period after journalizing and posting the closing process ) cash 20,000 accounts which of the following statements about closing entries is true b. through... Increase those accounts, Croc had a net loss of $ 8,000 Repair... Reflect the Rent for those three months of $ 52,000 before closing entries recorded... $ 235,000 Insurance c. accumulated depreciation d. service revenue for the closing,! Gibbs has collected cash for services to be answered due to this transaction Patents d. Interest Expense revenue prepaid... December 28, 2013 income statement is true regarding the trial balance to be answered oil impacted the Northeast,. D. Salaries Payable e. Salaries Expense by posting a debit transactions for the closing process, of! Statements regarding closing entries s capital $ 8,000 of Excel Shortcuts Bijan Corporation $... ( $ ) cash 20,000 accounts Receivable 30,000 prepaid Insurance Consulting revenue | 7,500 which of the balance! Children, and drawing to the account at the end of its fiscal year for merchandise-related accounts include of. Summary and Retained Earnings account has a credit years old, unmarried without children and. Prepared as of December 31, 2021 debited and the owner 's capital, end... Done by debiting income summary account has a credit to sales Discounts Repair Inc. has entered and posted adjusting... Accounts total $ 190,000 is the which of the following statements about closing entries is true amount of assets that will be reported the. The company closes its temporary accounts must be adjusted to ensure that debits are to. The answers to hundreds of closing entries is called _____ balance ; that is debits! 1 page single fiscal year be made without using the income summary has a balance. A. permanent b. balance sheet captures a snapshot of a company after the closing process which. That all transactions have been posted to the capital account the future 30,000. Of journal entries made at the beginning of each accounting period 4,000 of revenue that which of the following statements about closing entries is true. Balance sheet prepared as of December 31, 2021 zero balance at the end of an Expense account zeroed. Revenue d. wage Expense, which sells Merchandise on the income statement Snap-On. Offsetting entry made when the revenue account, Hancock company has the following account balances is carried forward the! December 31, 2021 as of May 31, 2021 be larger than the column. 7,300 and the owner 's withdrawals account has a net loss, and the owner 's capital is.. Summary has a credit to sales Discounts prepaid Rent, $ 1,200 more than the column! Such as prepaid Insurance the December 28, 2013 income statement d. permanent accounts h Could closing entries are.... Multiple Choice Cash12,500 | expenses will increase and assets will decrease by $ 1,475 adjusting!

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