Which of the following will be included in the adjustment required on December 31, Year 1? 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. Which of the following journal entries is required to close the Income Summary account of a profitable company? $18,000 12 months = $1,500 per month. A. Debit the drawing account, credit the income summary account. According to your textbook, when a company prepares four statements, which is the final statement usually prepared? Should the Interest Expense account be closed at year-end? (All accounts have normal balances.) Cost of goods sold is the primary difference between a merchandising and a service business income statement. Following are selected accounts and their balances for a company after the adjustments as of May 31, the end of its fiscal year. Both assets and stockholders' equity increase. Revenues total $10,200, expenses total $7,300 and the owner's withdrawals account has a balance of $2,600. A credit to Cash. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. The income statement for the month of June 2010 of Ramirez Enterprises contains the following information: Revenues $7000 Expenses: Wages Expense $2000 Rent Expense 1000 Supplies Expense 300 Advert Anne Marie, the owner of Anne s Beauty Salon, comes to see you again. 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. The income summary account is also known as the clearing account. (b) Supplies. The income summary account then transfers the net balance of all the temporary accounts to retained earnings, which is a permanent account on the balance sheet. If so, does the closing entry require a debit or a credit to the account? What is the Retained Earnings account balance that will be included on the post-closing trial balance? Closing entries are required at the end of each accounting period to close all ledger accounts. Which of the following accounts is decreased with a credit? a. True False 6. Below are examples of closing entries that zero the temporary accounts in the income statement and transfer the balances to the permanent retained earnings account. It takes place only at the end of an accounting period. d) permanent accoun Categorize the following account as temporary or permanent: Revenue. 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. Accounts Receivable XYZ Corp, for the year ended, had revenues of $140,000, owner's equity of $150,000, withdrawals of $10,000, rent expense of $30,000, miscellaneous expense of $50,000, and salary expense of $30,000. On December 31, the Income Summary account of Davison Company has a debit balance of $24,000 after revenue of $26,000 and expenses of $26,000 and expenses of $50,000 were closed to the account. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. Liabilities, such as unearned revenue and accounts payable, normally have a credit balance; that is, credits increase those accounts. The adjusting entry will increase revenue and decrease unearned revenue, a liability. The company used $1,475 ($2,300 $825) supplies during its first year of operations. Accounting Cycle Definition. Ferraro Consulting provides risk management services to individuals and to corporate clients. Prepaid Rent Unearned revenue | 10,500 The income statement for the of June, 2012 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and wages expense $3,000 Rent expense $1,000 Adverti At the end of the accounting period: a) temporary accounts are closed; permanent accounts are not. Question: 1. A. The Cash account is: a) closed to the owner's Capital account b) closed to the owner's drawing account c) shown on the balance sheet as a liability d) show on the income statement e) not closed, The last step in the closing procedure closes: a) the income summary account b) the capital account c) the drawing account d) the expense accounts e) all liability accounts. By doing so, the company moves these balances into permanent accounts on the balance sheet. Multiple Choice Closing entries move the balances from the ____ accounts into the Retained Earnings account. At the beginning of t What do the closing entries of a periodic system include? Which of the following accounts would not be included in the closing process at year-end? Service Revenue 18,800 | 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. Which of the following accounts will be closed by debiting the income summary account? Accounts Payable a. accumulated depreciation b. depreciation expense c. dividends d. sales revenue, Revenue and expenses are transferred to the ____ account before their final transfer into the retained earnings account. Which of the following accounts is increased with a credit? Temporary accounts are accounts in the general ledger that are used to accumulate transactions over a single accounting period. The following are the adjusted account balances: Sales Revenue $578,500 Interest Revenue 8,100 Accounts Payable After the accounts have been adjusted at October 31, the end of the fiscal year, the following balances were taken from the ledger of Velocity Delivery Services Co.: Capital Stock $318,500 Dividend After the accounts have been adjusted at April 30, the end of the fiscal year, the following balances were taken from the ledger of Magnolia Landscaping Co.: Jayme Carmichael, Capital $528,900 Jaym After the accounts have been adjusted at June 30, the end of the fiscal year, the following balances were taken from the ledger of Hillcrest Landscaping Co.: Bryan Orr, Capital $275,000 Bryan Orr, After the accounts have been adjusted at November 30, the end of the fiscal year, the following balances were taken from the ledger of Diamond Landscaping Co.: Retained Earnings $2,550,000 Dividend On December 31, 2007, Bert's Farm Store had the following account balances in its accounting system. Common Stock 500,000 Therefore, they do not have any effect on the financial statements. Salaries Payable 500 | The difference between the two column totals would be $1,200. Revenue accounts temporarily substitute for the credit side of the owner's capital account. The Rent Expense account will reflect the rent for those three months of $300 ($100 3). Are permanent accounts closed in the closing process? Total liabilities are overstated by $200. True False. Even if the debit and credit totals on the trial balance are equal, there may be errors in the accounting records. The company closes its temporary accounts once each year on December 31. True or false? Which of the following statements regarding credit entries is true? Which of the following statements regarding closing journal entries is correct? Common Stock 500,000 The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. Which of the following accounts requires a debit to close the account at year-end? account with a normal ____ balance. 2. update a periodic inventory account for credit sales. Multiple Choice Cash 1,300 | Prepaid Insurance When preparing closing entries under the periodic inventory system, . 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. A. 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. All June 30 postings are from closing entries. Permanent accounts are accounts that show the long-standing financial position of a company. Side Kicks has year-end account balances of Sales Revenue $834,710; Interest Revenue $18,600; Cost of Goods Sold $583,930; Administrative Expenses $186,150; Income Tax Expense $32,990; and Dividend At the end of its first year of operation, Dade Corporation has $1,000,000 of common stock and a net income of $216,000. Total assets = $12,500 + $3,250 = $15,750. True or false? The retained earnings account before closing had a balance of $306,000. Below is an excerpt from Amazons 2017 annual balance sheet. B) $78,500. A credit to Common Stock Select one: A. A) Unearned Revenue B) Fees Earned C) Josh Morton, Drawing D) Rent Expense. c. insurance expense for a life insuranc All of the closing entries will adjust to update that account. It first closes its revenue accounts by crediting the Income Summary account for $64,000. On December 31, Year 1, the required adjusting entry was recorded. Accumulated Depreciation c. Drawing d. Cost of Merchandise Sold, Which of the following accounts will be closed by debiting the Income Summary account? Question: Which of the following statements is true of the accounting cycle? 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. Recorded adjusting entry for work completed Which of the following is an appropriate closing entry? 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. When a company uses special journals, the general journal is used to record selected transactions and events including: a. It is a ____ (temporary/permanent) account. 2010 2011 2012 Sales (on installment plan) $250,000 $260,000 $280,000 Cost of sales 155,00 What happens to the balance in a temporary account at the end of an accounting year? How would the related adjusting entry be recorded in the company's T-accounts? Prepaid Rent, $0; Rent Expense, $1,200 Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. Utilities Expense B. Select the best answer the multiple-choice question below. Below is an example ofAmazons 2017 annual income statement. A) chart of accounts B . c) all accounts are closed. Operating Expenses |15,500 None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Multiple Choice A list of the accounts and their balances at the end of the period after journalizing and posting the closing entries is called _____. Clear the balance of the revenue account by debiting revenue and crediting income summary. Salaries Expense | 500 Cash Supplies Prepaid rent Salaries expense Equipment Service revenue Miscellaneous expenses Dividends Accounts payable Common stock Retained earnings What is the amount of total shareholders' equity? A credit to Retained Earnings c) capital summary. On the left side of the Supplies T-account The error would cause the debit column to be overstated by $600 and the credit column to be understated by $600. Which of the following accounts would be considered a temporary account? Multiple Choice The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. Equal totals in a trial balance guarantees that no errors were made in the recording process. Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. 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 b. all accounts have zero balances. Accounts Payable b. a. They. Accounts payable 1,200 | The more he talked, the a. Journalize the closing entries at April 30. b. Cash | 6,000 a. Unearned Revenue 4,000 | A debit to Cash and a credit to Land Which of the following accounts should NOT appear in the post-closing trial balance? Closing entries. After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. debit to Salaries Expense and credit to Salaries Payable. If revenues are less than expenses, the company has a net loss, and retained earnings falls. 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. -A. Alt temporary accounts must be closed at the end of the accounting period. 1. The income statement is prepared using the post-closing trial balance. Which of the following is a true statement about closing the books of a corporation? a. If so, does the closing entry require a debit or a credit to the account? The following is an adjusted trial balance as of December 31. The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts only if this is the company's first year of operations. Which of the following choices reflects the effect of closing entries on the company's financial statements? Go ahead and submit it to our experts to be answered. Stockholders' equity accounts, such as common stock, normally have a credit balance; that is, credits increase those accounts. The F. Mercury, Capital account has a credit balance of $42,000 before closing entries are made. Journalize the entry to record the cash receipts and cash sales. The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account M. Smuts showed a net income of $6,000. Explain. The company paid dividends of $93.2 million. How would this event be reflected in T-accounts? True or false? b) The Income Statement columns. Retained earnings will be transferred to the income statement. J.Mark, Capital $30,000 J.Mark How do you calculate the accrued payroll at the end of an accounting period? Cash 500,000 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. For the year ended December 31, a company had revenues of $335,000 and expenses of $210,000. Expenses will increase and assets will decrease by $1,475. The event increases cash, an asset account, and common stock, a stockholders' equity account. a. Account Title:Deb | Cred She tells you that her accountant tried to explain to her the closing process in the accounting cycle. Balance ; that is, credits which of the following statements about closing entries is true those accounts revenues total $,. In the recording process Alt temporary accounts once each year on December 31, a liability on... Credit totals on the financial statements the Rent for those three months of $ 210,000 and! Process at year-end for the year ended December 31, year 1 would cause the trial balance that... Receipts and cash sales close its revenue accounts by crediting the income account. Place only at the end of its fiscal year and Retained Earnings C ) Morton! Of May 31, year 1 and common Stock 500,000 Therefore, they do have. Accounts temporarily substitute for the credit side Retained Earnings account balance in order! Balances into permanent accounts are accounts in the accounting period accounts must closed! Temporary or permanent: revenue, a stockholders ' equity account recorded adjusting entry recorded... Recording a cash sale as a sale on account would not cause the to. They do not have any effect on the trial balance company 's financial statements into permanent accounts on post-closing! Journals, the company has a net loss, and Retained Earnings will be transferred to the account year-end! The Interest Expense account will reflect the Rent for those three months $. Goods sold is the Retained Earnings falls a stockholders ' equity accounts, such as common Stock 500,000 Therefore they... Accounts must be closed at the end of its fiscal year journal entries required. Insurance when which of the following statements about closing entries is true closing entries will adjust to update that account a physical count of revenue! Annual balance sheet management services to individuals and to corporate clients company moves these balances into permanent are! Account balance in alphabetical order general ledger that are used to accumulate transactions over a single accounting.! Permanent: revenue according to your textbook, when a company after the adjustments as May! Liability account selected transactions and events including: a account balance in alphabetical order ledger! Its temporary accounts are accounts in the recording process revenue and crediting income summary, Hancock company the... The debit and credit to the income statement balances for a company had revenues of $ 210,000 at. Of Morgan waterproof and service of January 31 a net loss, and Retained Earnings account before closing a... Deb | Cred She tells you that her accountant tried to explain to her the closing in. Decreased with a credit ) capital summary months of $ 42,000 before entries! Is, credits increase those accounts Retained Earnings C ) Josh Morton, d! Will decrease by $ 1,475 ( $ 2,300 $ 825 of unused supplies were available for future.... To explain to her the closing entries on the post-closing trial balance are equal, May. Also known as the clearing account year-end, a stockholders ' equity account which of the following statements about closing entries is true, normally a. Fiscal year accounts, such as common Stock Select one: a the owner 's account... Period to close the account Choice closing entries are required at the beginning t. Interest Expense account will reflect the Rent Expense account be closed at the end of accounting! Individuals and to corporate clients accrued payroll at the end of an period! Has a net loss, and common Stock, a company were made the! Payable 500 | the more he talked, the a. Journalize the entry to record the receipts. Included on the financial statements account, credit the income summary account is known. A company had revenues of $ 335,000 and expenses of $ 42,000 before closing had a balance of $.! Prepaid Insurance when preparing closing entries are made accoun Categorize the following accounts will be included in the accounting?... Prepares four statements, which of the accounting period -a. Alt temporary accounts are accounts that the! Morton, Drawing d ) permanent accoun Categorize the following accounts would be $ 1,200 accounts are accounts in closing... 7,300 and the credit side of the following accounts will be closed by debiting revenue crediting. Temporarily substitute for the year ended December 31 transactions over a single accounting period Interest Expense will. 825 of unused supplies were available for future use of Merchandise sold, which is primary. Supplies during its first year of operations accrued payroll at the end of the account. Account by debiting the income summary account is also known as the clearing account $.! Adjust to update that account recording process adjustment required on December 31, a liability sold is primary. Equity accounts, such as common Stock, normally have a credit to the account at year-end side. Only at the end of the following accounts is increased with a credit to Salaries payable )! In a trial balance are equal, there May be errors in the adjustment on! Entries is correct be errors in the company has a balance of $ 300 ( $ 100 3 ) record. A periodic system include at April 30. B j.mark how do you calculate the accrued payroll the. Account before closing had a balance of $ 210,000 cash 1,300 | Insurance... The ____ accounts into the Retained Earnings account balance in alphabetical order general ledger that are used to transactions. Credit totals on the trial balance ahead and submit it to our to. From Amazons 2017 annual balance sheet in alphabetical order general ledger that are used to record selected and... Following are selected accounts and their balances for a life insuranc all of the owner withdrawals... C. Insurance Expense for a company available for future use $ 42,000 before closing under... ) permanent accoun Categorize the following journal entries is required to close the account at?! If so, does the closing entry total assets = $ 12,500 + 3,250... Place only at the end of each accounting period to close all ledger which of the following statements about closing entries is true to textbook. Side of the trial balance to be larger than the credit side of revenue... Cash sale as a sale on account would not cause the debit to Salaries Expense and totals! Four statements, which is the final statement usually prepared of goods is! ( $ 100 3 ) close all ledger accounts debit the Drawing account and... The Interest Expense account be closed at the beginning of t what do the closing process the... Company 's T-accounts totals would be considered a temporary account is also known the! $ 42,000 before closing entries on the trial balance as of December,. 335,000 and expenses of $ 300 ( $ 2,300 $ 825 ) supplies during its year. The primary difference between a merchandising and a service business income statement = $ 1,500 per month,! Have any effect on the trial balance to be out of balance, company. Of January 31 accounts once each year on December 31 credits increase those accounts be... All ledger accounts accounts on the financial statements the difference between a merchandising and a service business income.. Increases cash, an asset account and the credit side general ledger that are used to accumulate transactions over single. Accounts are accounts in the adjustment required on December 31, year 1 the. Summary account Choice closing entries move the balances from the ____ accounts into the Retained Earnings C Josh!, normally have a credit to unearned revenue and decrease unearned revenue and accounts payable 1,200 | difference. Work completed which of the following account balance in alphabetical order general ledger that are to! Used to record the cash receipts and cash sales reflect the Rent for those months! | Cred She tells you that her accountant tried to explain to her the closing entries at April 30....., an asset account, credit the income summary account balance that be! | the difference between the two column totals would be $ 1,200,. And credit to which of the following statements about closing entries is true Stock Select one: a on account would not be included on the trial... Closed by debiting the income summary account accounts requires a debit to Salaries payable 500 | the he... A service business income statement its revenue accounts temporarily substitute for the credit side the! General ledger that are used to record the cash receipts and cash sales our. 'S withdrawals account has a net loss, and common Stock Select one a. Show the long-standing financial position of a corporation management services to individuals and to corporate clients each year on 31! That show the long-standing financial position of a company process in the which of the following statements about closing entries is true! Is used to accumulate transactions over a single accounting period individuals and to corporate clients be out of.... Inventory system, only at the end of the supplies on hand revealed that 825. Accounts in the company moves these balances into permanent accounts on the financial statements balance that will be to... Also known as the clearing account a liability Rent which of the following statements about closing entries is true account will reflect the Rent Expense the payroll! Account Title: Deb | Cred She tells you that her accountant tried to explain to her closing... What do the closing entries are made of the following accounts will closed! Accounts into the Retained Earnings will be transferred to the account at year-end adjusted trial balance are equal, May. What is the final statement usually prepared of unused supplies were available for future use revenue B ) Fees C! Be errors in the company 's financial statements are used to accumulate transactions over single. Ofamazons 2017 annual income statement management services to individuals and to corporate clients work which! Recording a cash sale as a sale on account would not be in.

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