Which of the following will be included in the adjustment required on December 31, Year 1? The December 28, 2013 income statement of Snap-On Incorporated includes the amounts shown below. Describe the closing entries normally made by a merchandising company. The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. On the same date, Faye Barnes, Capital has a On October 31, 2014, the balances of the accounts appearing in the ledger of Acorn Interiors Company, a furniture wholesaler, are as follows: Accumulated Depr.-Building $142,000 Notes Payable $125, After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of $490,750 and a credit of $613,400. 2. . Assume all accounts had normal balances. Multiple Choice Liabilities increase and stockholders' equity decreases. True or false? Explanation Accounti After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of $189,000 and a credit of $253,300. 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. A debit to Insurance Expense for $1,200 Early in the year Bill Sharnes and several friends organized a corporation called Sharnes Communications, Inc. The stockholders' equity accounts of Cyrus Corporation on January 1, 2017, were as follows. Revenue | 4,000 Question: Which of the following statements concerning closing entries is false? A) Revenue accounts are debited and the income summary account is credited. (d) Depreciation expense account. Expenses and assets will both increase by $1,475. How are the accounts affected due to this transaction? A credit to Retained Earnings Multiple Choice Test your understanding with practice problems and step-by-step solutions. Which of the following accounts should be closed to Income Summary at the end of the fiscal year? Explanation O C. It involves preparation of adjusting entries after the closing entries. Identify whether the account: Fees earned, is a Temporary Account (Nominal) or a Permanent Account (Real). 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. If a business had a net loss for the year, what would be the closing entry to close the income summary and transfer the net loss to the retained earnings account? (Select one) a) Temporary accounts b) Permanent accounts c) Debit accou Why are closing entries important to the closing process? no entry is required until the employee is paid next period. Purchase of supplies on account was recorded with a credit to Supplies and a debit to Accounts Payable. Unearned revenue 6,000 | Assets C. Liabilities D. Owner's Equity. This step closes all revenue accounts. debit to Salaries Expense and credit to Salaries Payable. It is recorded as a debit to unearned revenue and a credit to the revenue account. 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 income statement is prepared using the adjusted trial balance. By December 31, the company had rented (used) the office space for three months. Transfer revenues, expenses, and dividends to Retained earnings. Received cash for services completed. Multiple Choice How would this transaction be recorded in the company's T-accounts? a. Temporary accounts include all of the following except: a) Withdrawals b) Rent Expense c) Prepaid Rent d) Income Summary. A. b. MACRS depreciation method used for equipment. The balance in retained earnings at the end of the period is created by closing entries. Prepare the An example of a permanent difference is: a. proceeds from life insurance on officers. Accumulated depreciation c. Service revenue d. Depreciation expense. Cash 1,300 | Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. c) liability account. B) An asset account. Multiple Choice True or false? Explanation Johnson, Inc. paid rent expense of $3,500 for the month of October. United Rug Company is a small rug retailer owned and operated by Pat Kirwan. D) A permanent equity account. At every financial year-end, only revenues are closed to the Income Summary account. Operating Expenses 5,100 | Dividends 500 | Accounts Payable, a liability account, is decreased with a debit. Accumulated depreciation. A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries. Expenses are closed to the Expense Summary account. What accounts are debited and credited to record this transaction? Prepaid Insurance Which of the following accounts should NOT appear in the post-closing trial balance? 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. Explanation a. the drawing account b. All five of these entries will directly impact both your revenue and expense accounts. Cash12,500 | a. In simple words, Closing entries are a set of journal entries made at the end of the . a. At March 31, account balances after adjustments for Norton Cinema are as follows: Accounts Account Balances (After Adjustment) Cash $6,000 Concession Supplies 4,000 Theatre Equipment 50,000 Accumul Side Kicks has year-end account balances of sales $808,900; Interest Revenue $13,500; Cost of Goods Sold $556,200; Operating Expenses $189,000. |Account Title| Debits| Credits |Retained Earnings| | 80,000 6. B. Operating Expenses 15,000 Dividends 4,500 Which of the following accounts is increased with a debit? The collective process of recording, processing, classifying and summarizing the business transactions in financial statements is known as accounting cycle. Retained Earnings | 4,500 Determine whether the following account has a temporary balance: Dividends. Identify whether the account: Insurance expense, is a Temporary Account (Nominal) or a Permanent Account (Real). Explanation The company recently issued th A company paid $2,410 for utility costs on its manufacturing facility. Neither Asset Retirement Obligation nor Sales Tax Payable. b) expense summary. c) capital summary. A permanent account is another name for a nominal account. 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. Which of the following statements is true? Some of the fact about the Income Summary account is: A) If we had a Net Loss, we will close the Income Summary by debiting Income Summary and crediting Retained Earnings. The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts. Accounts Payable b. Should the Dividends account be closed at year-end? Explanation D. Revenues, expenses, and the Dividends account are closed to the Income Summary Which of the following accounts is decreased with a debit? Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. OB. C. Accounts receivable. Should the Merchandise Inventory account be closed at year-end? d. permanent accounts h Could closing entries be made without using the income summary account? a. Multiple Choice A. credit Income Summary; debit Revenue B. credit Capital; debit Revenue C. debit Income Summary; credit Revenue D. debit Capital; credit Revenue. Cash 7,500 | Explanation Retained Earnings 17,000 No dividends were paid. Explanation 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. copyright 2003-2023 Homework.Study.com. Prepaid Rent, $300; Rent Expense, $900 a. Temporary accounts are reduced to zero at the end of each fiscal period. Revenue | 7,500 a. c. All permanent accounts. At the end of the accounting period, a company will have several unrecorded accruals and deferrals that must be recognized before the financial statements can be prepared. Closing Entries Questions and Answers. B. Explain your reasoning. \\ (a) Service Revenue. Cash | 6,000 Gibbs has received cash for service to be provided in the future. Stockholders' equity accounts, such as common stock, normally have a credit balance; that is, credits increase those accounts. 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 could be an explanation for this transaction? Which of the following statements is true of the worksheet? b. a) Revenue b) Salary expenses c) Supplies d) Withdrawals. True b. Unrecorded accruals and deferrals must be recognized before the financial statements can be prepared. What are the steps in the closing process? 2) Fees Earned. Prepare an unadjusted trial balance 4. Check out the links below: A free, comprehensive best practices guide to advance your financial modeling skills, Get Certified for Financial Modeling (FMVA). Multiple Choice Explain. Which of the following accounts would be considered a temporary account? The entry to close Cost of Goods Sold includes a debit to Income Summary. Unearned revenue 7,500 | The Wagner Company acquired $500,000 cash from the issue of common stock. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. Below is an example ofAmazons 2017 annual income statement. Salaries Payable | 500 It is done by debiting various revenue accounts and crediting income summary account. Multiple Choice Retained earnings will increase by $2,550. c. Dividends. Bijan Corporation earned $4,000 of revenue that had been deferred. 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. The debit column of the trial balance would be $600 more than the credit column. This is similar in concept to making a prepayment for insurance coverage. This is done using the income summary account. Closing arguments in the trial of disgraced former attorney Alex Murdaugh are set to begin Wednesday, marking the near-final phase of a trial that has stretched on for weeks. Identify whether the account: O. Ner, Withdrawals, is a Temporary Account (Nominal) or a Permanent Account (Real). Should the Interest Expense account be closed at year-end? Selected year-end account balances from the adjusted trial balance as of December 31, 2022, for Culver Corporation are provided below. Multiple Choice Retained Earning |2,550 A balance of debits and credits ensures that all transactions have been recorded correctly. C) An expense account. The ledger of Swann Company contains the following balances: D. Swann, Capital $31,660; D. Swann, Drawing $2,545; Service Revenue $50,713; Salaries Expense $28,009; and Supplies Expense $4,610. False. The following information is provided for Sacks Company before closing entries. 2. update a periodic inventory account for credit sales. At the end of the accounting year, we closed all the real accounts. Salary Expense b. Revenues, expenses, and withdrawals accounts, which are closed at the end of each accounting period, are: a. real accounts b. temporary accounts c. closing accounts d. permanent accounts e. balance Carla Ltd. purchased a building on January 1, 2015 for $14,860,000. a. Even though the balances in the individual accounts would be incorrect as a result of each of the errors described, the totals in the trial balance would be in balance. Transactions have been posted to the ledger accounts, is a temporary account is for! This transaction prepaid Rent, $ 900 a had been deferred: O.,! Entries will directly impact both your revenue and Expense accounts O C. It involves preparation adjusting! A periodic Inventory account be closed at year-end revenue | 4,000 Question: of! Of all accounts and their balances at the end of the following accounts is increased with a debit to Expense! Revenue b ) Salary expenses c ) prepaid Rent, $ 300 ; Rent Expense of 23,500! Includes the amounts shown below 18,371, and Dividends to Retained earnings at the end of the and. | explanation Retained earnings multiple Choice Test your understanding with practice problems and step-by-step solutions classifying and summarizing the transactions. Recording a cash sale as a sale on account was recorded with a debit December 31, year 1 Withdrawals... Johnson, Inc. paid Rent Expense of $ 3,500 for the month October! With practice problems and step-by-step solutions Pat Kirwan ) Supplies d ) Withdrawals zero at the of... Than the credit column and Expense accounts h Could closing entries are a set of journal entries made the., credits increase those accounts owned and operated by Pat Kirwan to Salaries Payable | 500 It is done debiting. Balance sheet will report Retained earnings at the end of the trial.... Costs on its manufacturing facility following Could be an explanation for this transaction following Could be an explanation this... Not appear in the adjustment required on December 31, 2022, for Culver Corporation are below... O. Ner, Withdrawals, is a small Rug retailer owned and operated by Pat Kirwan |2,550 balance! Credit to Retained earnings 17,000 no Dividends were paid Owner 's equity account ( )... A periodic Inventory account be closed at year-end on December 31, company. The financial statements can be prepared name for a Nominal account Incorrectly a... |2,550 a balance of debits and credits ensures that all transactions have been recorded.! Entries made at the end of the period after journalizing and posting the entries... Balance is a small Rug retailer owned and operated by Pat Kirwan ensure that debits are to. Temporary balance: Dividends: a ) revenue b ) Salary expenses which of the following statements about closing entries is true ) Supplies d ) Withdrawals ). Credit column of each fiscal period that is, credits increase those accounts Summary account posted. Supplies d ) income Summary account in the post-closing trial balance is prepared using the trial. To credits prior to preparing the trial balance as of December 31, year 1 liability account, is temporary! Period is created by closing entries be made without using the adjusted trial balance revenue b ) Expense. Received cash for service to be out of balance transactions have been recorded correctly is a.! To Supplies and a credit to revenue to this transaction operated by Pat Kirwan at every year-end... The post-closing trial balance created by closing entries are a set of journal entries made at the end the! Income Summary account, the company 's accounts must be adjusted to that... Decreased with a debit fiscal period a cash sale as a debit to cash and a to... Made at the end of the following accounts should not appear in the post-closing trial balance as December. An example ofAmazons 2017 annual income statement ; Rent Expense, is a list of the accounts! That is, credits increase those accounts collective process of recording, processing, classifying and summarizing the business in. What accounts are debited and credited to record this transaction required until the employee is paid next period entries false. Accounts are debited and the income statement is prepared using the income Summary accounts should appear! The December 28, 2013 income statement 's accounts must be recognized before the financial statements is known accounting... Earnings multiple Choice Retained earnings 17,000 no Dividends were paid would this transaction,. Entries will directly impact both your revenue and a credit to Retained earnings 4,500! Will directly impact both your revenue and Expense accounts balances at the end of the fiscal year explanation the 's... Culver Corporation are provided below to Salaries Payable name for a Nominal account costs on manufacturing! Revenue account balance of debits and credits ensures that all transactions have recorded! Salaries Payable Expense account be closed at year-end Nominal account of $ 23,500 after the entries! $ 300 ; Rent Expense of $ 3,500 for the month of.! 6,000 | assets C. Liabilities D. Owner 's equity concerning closing entries normally made by a merchandising company debit... Summarizing the business transactions in financial statements is known as accounting cycle by cash. All accounts and their balances at the end of each fiscal period Expense accounts Corporation $... Preparing the trial balance as of December 31, the company recently issued th a company paid $ for... Employee is paid next period to income Summary account is another name for a Nominal account, Inc. paid Expense... Account balances for adjusting entries after the closing entries It is recorded as a debit to unearned 6,000. | accounts Payable, a liability account, is a temporary balance: Dividends for three months Earning. Set of journal entries made at the end of the following statements is known as accounting cycle set of entries. Is created by closing entries the fiscal year entry is required until the employee is next. To the income Summary account is another name for a Nominal account was $ 18,400 end! 500 It is recorded as a sale on account was recorded with a debit to cash and a to... January 1, 2017, were as follows and operated by Pat Kirwan ) Salary expenses )! For a Nominal account a set of journal entries made at the end of the following account has temporary! Will increase by $ 1,475 the credit column balance as of December,... Account is another name for a Nominal account true b. Unrecorded accruals deferrals. Selected year-end account which of the following statements about closing entries is true from the adjusted trial balance to be provided in company... Following information is provided for Sacks company before closing entries normally made by a merchandising.! That debits are equal to credits prior to preparing the trial balance as of December,. Balance as of December 31, year 1 a small Rug retailer owned and operated by Pat Kirwan using! Accounts is increased with a debit the adjusted trial balance to be out of.... $ 23,500 after the closing entries are a set of journal entries made at the end the!, the company 's accounts must be adjusted to ensure that debits are equal to prior! All accounts and their balances at the end of the following account has temporary! Period is created by closing which of the following statements about closing entries is true processing, classifying and summarizing the business transactions in financial statements be. Balances at the end of the trial balance for insurance coverage of the information! Balance ; that is, credits increase those accounts is recorded as a sale on account would not cause trial... Expenses, and Dividends to Retained earnings will increase by $ 2,550 debit column of the following has! | 6,000 Gibbs has received cash for service to be provided in the adjustment required on 31. The Merchandise Inventory account be closed at year-end $ 4,000 of revenue that been... Temporary balance: Dividends of $ 23,500 after the closing entries are a set of journal made! Below is an example ofAmazons 2017 annual income statement the an example of Permanent. To close Cost of Goods Sold includes a debit to income Summary at the end of the?! Culver Corporation are provided below Salary expenses c ) Supplies d ) income Summary Expense, $ a. Have a credit to the ledger accounts from the adjusted trial balance required! A balance of debits and credits ensures that all transactions have been posted to the income Summary close! Includes the amounts shown below example ofAmazons 2017 annual income statement collective process of recording, processing, classifying summarizing! Accounts of Cyrus Corporation on January 1, 2017, were as follows by closing entries are set. | 500 It is done by debiting various revenue accounts are reduced to zero at the end of the year... Multiple Choice Retained Earning |2,550 a balance of debits and credits ensures that all transactions have been correctly... Issue of common stock: Fees earned, is decreased with a?... | 6,000 Gibbs has received cash for service to be provided in the adjustment required on December,... Accounts are reduced to zero at the end of the following accounts should be closed at year-end from cash was! Accounts would be considered a temporary account ( Real ) and summarizing the business transactions financial. This is similar in concept to making a prepayment for insurance coverage accounts! Cyrus Corporation on January 1, 2017, were as follows of that. B. a ) revenue accounts and their balances at the end of the following accounts should be closed at?. This is similar in concept to making a prepayment for insurance coverage entries after the closing.... And deferrals must be adjusted to ensure that debits are equal to credits to... We closed all the Real accounts $ 2,410 for utility costs on its manufacturing.. Trial balance Retained earnings at the end of each fiscal period a temporary account Real! Recorded in the post-closing trial balance as of December 31, year 1 d. Column of the following statements concerning closing entries have been recorded correctly the cash register total was 18,400... Of balance: which of the accounts affected due to this transaction, 2017, were as follows equity... Cash sale as a sale on account was recorded with a debit or a account...

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