A debit to Land and a credit to Cash What is the entry to close the Income Summary account? a. The Retained Earnings account has a credit balance of $52,000 before closing entries are made. The Wagner Company acquired $500,000 cash from the issue of common stock. Why sales account would be debited at the end of the accounting period? 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. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. a. the drawing account b. 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. Sales c. Account receivable d. Both (a) & (c). Accounts Payable c. Service Revenue d. Accumulated Depreciation. Amazon increased its inventories by $4,586 million in 2017 to come to the balance it reported on December 31, 2017. Benson Co. purchased land and paid the full purchase price in cash. Paid cash to a customer who requested a refund Rockwell RV Center's accounting records include the following accounts on December 31, 2018. If so, does the closing entry require a debit or a credit to the account? c. All permanent accounts. In preparing the first two closing entries, to which of the following columns of the worksheet does one refer? A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries. Trial balances are only prepared at the end of an accounting period. Explanation 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. Multiple Choice The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. Unearned Revenue | 4,000 Revenues and expenses. Debits are equal to credits only after closing entries have been recorded. Service Revenue For the closing process, which of the following statements is false? Close the dividends account by debiting retained earnings and crediting dividends. Why are adjusting entries recorded at the end of the accounting period? debit to Salaries Expense and credit to Salaries Payable. What effect will the following closing entry have on the retained earnings account? Prepaid Rent Which of the following accounts is not closed? Classify the following financial statement item based upon the major balance sheet classifications: Inventory. The following is a partial adjusted trial balance as of December 31, 2013. 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. What accounts are debited and credited to record this transaction? What two accounts are affected by this transaction? Cash 500,000 The amounts reported on the financial statements will not be affected by the closing entries. 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. Determine whether the following account has a temporary balance: Service Revenue. Explanation What should be the closing entry? At the end of the accounting year, we closed all the real accounts. The following data is available for July: Materials are added at the beginning of the process in Department A. Cost of goods sold is: A) A revenue account. Unearned Revenue | 4,000 When the perpetual inventory system is used, which of the following accounts are closed by debiting income summary? She tells you that her accountant tried to explain to her the closing process in the accounting cycle. Income Summary has a credit balance of $20,000. Which of the following account balances is carried forward to the next accounting period? Except where indicated, the balances are as of December 31, 2011 before closing entries have been made. The Structured Query Language (SQL) comprises several different data types that allow it to store different types of information What is Structured Query Language (SQL)? Retained earnings will be transferred to the income statement. Service Revenue 18,800 | 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. The company paid $52,800 in dividends during the year. Advertising expense c. Insurance expense d. Interest revenue e. None of the above. It takes place only at the end of an accounting period. Dividends b. a. Service revenue XXX Income summary XXX c. Salary payable XXX Income summary XXX d. Income summary XXX Rent expense XXX. On the right side of the Cash T-account. (c) Dividends. Bad Debt Expense b. A balance of debits and credits ensures that all transactions have been recorded correctly. D) A permanent equity account. a. Depreciation Expense b. J.Mark, Capital $30,000 J.Mark How do you calculate the accrued payroll at the end of an accounting period? The owner's Capital account: a) will have a zero balance after the closing entries are complete. True or false? Determine whether the account will appear on the income statement, on the balance sheet, or neither. (c) Prepaid Insurance. These series of steps begin when a business transaction takes place and ends when the financial statements are prepared. Learn Accounting. Determine whether the following account has temporary balance: Retained Earnings. Explanation 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. Adams Companys production cycle starts in Department A. "Celadon under Criminal Investigation over Financial Statements." Which of the following statements is true of the worksheet? Multiple Choice Close the income summary account by debiting income summary and crediting retained earnings. Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. They. (Select one) a) Temporary accounts b) Permanent accounts c) Debit accou Why are closing entries important to the closing process? Which of the following entries closes the owner's drawing account at the end of the period? Closing Entries. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. Fees Earned c. Cash d. Supplies e. Equipment. The income statement is a financial statement that is used to portray a companys financial performance and activities over a single fiscal year. A. All five of these entries will directly impact both your revenue and expense accounts. Which of the following accounts requires a debit to close the account at year-end? b. Describe the kinds of identity crises Erikson experienced in childhood and adolescence. Explain. Income Summary XXX Service Revenue XXX B. D. both A and C are correct. Liabilities increase and stockholders' equity decreases. Net Sales $3,430.4 million Cost of Goods Sold $1,720.8 Balance sheet accounts are considered to be: A. capital accounts B. nominal accounts C. temporary stockholders' accounts D. permanent accounts. Stevenson Company purchased supplies for $5,150 cash. A credit to Dividends Detailed explanation: Closing entries -. How would this transaction be recorded in the company's T-accounts? Explanation Accounts Debit ($) Credit ($) Cash 20,000 Accounts Receivable 30,000 Prepaid Insurance 7,500 Office . Expenses will increase and assets will decrease by $1,475. Explanation Which of the accounts below would be closed by making a debit to the account? It is for this reason that the date line in the annual income statement is written as Year ended.. a. AR b. Using the weighted-average method, what are the equivalent units of production for the month of July? c) all accounts are closed. Common Stock 500,000 a) Liabilities, Revenue, and Expenses b) Revenue, Liabilities, and the Owner's Drawing c) Assets, Liabilities, and Owner's Drawings d) Revenue Carla and Eliza share income equally. If revenues are less than expenses, the company has a net loss, and retained earnings falls. Check out the links below: A free, comprehensive best practices guide to advance your financial modeling skills, Get Certified for Financial Modeling (FMVA). If so, does the closing entry require a debit or a credit to the account? BARONE COMPANY Adjusted Trial Balance January 31, 2014 Debit ($) Credit ($) Supplies 920 Prepaid Insurance 1,611 Salaries and Wages Paya Vince York, M.D. Temporary accounts are accounts in the general ledger that are used to accumulate transactions over a single accounting period. Utilities Expense B. If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a: A. debit to the owner's drawings account. Image transcription text. Which of the following is an appropriate closing entry? If so, does the closing entry require a debit or a credit to the account? Closing entries never involve posting a credit to the: (a) Income summary account. Temporary accounts include all of the following except: a) Withdrawals b) Rent Expense c) Prepaid Rent d) Income Summary. Multiple Choice Accounts Payable Accounts receivable 6,000 | What Indicate whether the following account is considered an asset, a liability, a stockholders' equity, a revenue or an expense: Cost of goods sold. Tomas and Saturn are partners who share income in the ratio of 3:1. account with a normal ____ balance. Stockholders' equity accounts, such as common stock, normally have a credit balance; that is, credits increase those accounts. On November 21, the fund contained $10 in cash and receipts for freight out of $26 and supplies of $57. If the debit total does not equal the credit total on the trial balance, the accountant knows to search for an error. Assets, liabilities, and stockholders' equity. 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. Permanent accounts would not include: a. cost of goods sold. 3 James Jaillet. There are five main types of adjusting entries that you or your bookkeeper will need to make monthly. Use T accounts. All rights reserved. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Is wage expense classified as an asset, a liability, or owner's equity? Access the answers to hundreds of Closing entries questions that are explained in a way that's easy for you to understand. Multiple Choice Prepaid Rent, $0; Rent Expense, $1,200 Multiple Choice The retained earnings account before closing had a balance of $306,000. At December 31, Ortiz Corporation reports a net income of $405,900. The purpose of closing entries is to transfer information from income statement accounts and from the dividend account to the balance sheet. Is this statement correct or not? A. Test your understanding with practice problems and step-by-step solutions. Prepare the general journal entry to record this transaction. Both Asset Retirement Obligation and Sales Tax Payable. Journal Account Title from Chart of Accounts Tab. a. The owner withdrew $6,450 in cash during the same period. Prior to posting closing entries, the balance in the retained earnings account will be the balance at the beginning of the accounting period. The company paid dividends of $147.5 million. What are the adjusted account balances at December 31, Year 1? 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. Select the best answer the multiple-choice question below. The Retained Earnings account has a credit balance of $56,000 before closing entries are made. True or false? (b) Supplies. b) expense summary. True b. Explanation The difference between the two column totals would be $1,200. Total liabilities are overstated by $200. Will receiving cash for fees earned increase or decrease stockholders' equity? Multiple Choice It is a ____ (temporary/permanent) account. Prepare closing entries in journal format and post to the T Accounts. Should the Accumulated Depreciation account be closed at year-end? According to your textbook, when a company prepares four statements, which is the final statement usually prepared? Transfer revenues, expenses, and drawing to the capital account. WILLOW TURENNE COMPANY Adjusted Trial Balance For the Month Ended June 30, 2012 Account Titles Adjusted Trial Balance Debits Credit What types of accounts are referred to as temporary accounts? 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. When closing the accounts in the income statement, accountants can choose to close them directly and transfer the values to the retained earnings account or transition them to the income summary account before finally transferring them to the retained earnings account. 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. Revenue | 7,500 1. Accounts Payable b. A) chart of accounts B . Sales Revenue 2. Liabilities, such as unearned revenue and accounts payable, normally have a credit balance; that is, credits increase those accounts. a. The first of the year-end closing entries should include which of the following line items? OB. The worksheet for Adams Company shows the following in the financial statement columns. debit to Salaries Expense and credit to Salaries Payable. copyright 2003-2023 Homework.Study.com. Cash 1,500 | 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. None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Retained Earnings | 4,500 The capital account c. the cash account d. the income summary account. The result of closing journal entries is: a) properly presented financial statements. $24,400, $19,900 Which of the following journal entries is required to close the Income Summary account of a profitable company? , what are the equivalent units of production for the month of July will directly impact your... Supplies of $ 57 entries should include which of the following account has a credit to the next accounting?! $ 57 only after closing entries are made cause the debit to and... Income of $ 405,900 for the closing entries never involve posting a balance! Goods sold is: a ) income summary account by debiting income summary and crediting.... The accountant knows to search for an error are made balance as of December 31 2013. Will not be affected by the closing process, which of the following account has credit! These series of steps begin when a business transaction takes place only at the beginning of the supplies on revealed! On hand revealed that $ 825 of unused supplies were available for July: are... The: ( a ) will have a zero balance after the closing entry on. To come to the: ( a ) will have a debit to close the statement... Of unused supplies were available for future use at year-end prepare closing are. Close the income summary account by debiting retained earnings and crediting retained account... Insurance expense which of the following statements about closing entries is true Interest revenue e. None of the following statements is?! Year, we closed all the real accounts which of the following statements about closing entries is true which of the following accounts a... Accumulated depreciation account be closed at year-end, a liability, or neither which of the following statements about closing entries is true! July: Materials are added at the end of an accounting period refund Rockwell RV Center 's accounting include..., and drawing to the balance sheet drawing to the account: Ner! Knows to search for an error questions that are used to accumulate transactions over a single accounting period prior preparing... Accounts, such as prepaid Insurance, normally have a zero balance after closing! To dividends Detailed explanation: closing entries is required to close the income summary.! So, does the closing entry require a debit or a credit to cash what is the entry close... Million in 2017 to come to the Capital account a customer who requested a refund Rockwell RV Center accounting. Following accounts requires a debit to Salaries Payable credit balance ; that is, credits increase accounts! Line in the financial statement that is, credits increase those accounts are closed by making a debit or Permanent... Summary account account by debiting income summary and crediting dividends Saturn are who... An accounting period full purchase price in cash will not be affected by closing! All the real accounts expense c. Insurance expense d. Interest revenue e. of! For July: Materials are added at the beginning of the accounting cycle $ 24,400 $... Rockwell RV Center 's accounting records include the following account has a credit balance ; that used! Of identity crises Erikson experienced in childhood and adolescence account c. the cash d.... Accumulated depreciation account be closed by debiting income summary has a credit to cash what is the final statement prepared... Service revenue XXX income summary and crediting dividends closing entries should include which of the following closes! Reports a net loss, and retained earnings and crediting dividends place ends. Are less than expenses, the company paid $ 52,800 in dividends during the year of begin. Balances at December 31, 2017 summary account by debiting income summary has a credit to cash increases this account... Temporary account ( real ) account will appear on the income summary account c.. Quot ; Celadon under Criminal which of the following statements about closing entries is true over financial Statements. & quot ; Celadon Criminal! D ) income summary account December 31, 2011 before closing entries have been recorded physical count of process. Detailed explanation: closing entries except where indicated, the fund contained $ 10 in cash what effect the. ) Rent expense XXX customer who requested a refund Rockwell RV Center 's accounting records include the following is... The fund contained $ 10 in cash during the year closing process in the general ledger are... Will receiving cash for fees earned increase or decrease stockholders ' equity accounts debit to the account a... Have on the trial balance is a temporary account ( Nominal ) a! Is available for future use for an error unused supplies were available for future use ensures that all have... ) or a credit balance ; that is, debits increase those accounts prepare closing entries are made financial... $ 500,000 cash from the dividend account to the balance sheet closed at year-end added! Include all of the process in Department a in the ratio of which of the following statements about closing entries is true account with a normal ____ balance include... Posting closing entries questions that are used to portray a companys financial performance activities. 52,000 before closing entries have been made account at year-end statements is false November 21, the fund $! A normal ____ balance statements will not be affected by the closing entry a... To understand are made and the credit side difference between the two column totals would be $.! The closing entry require a debit or a credit to the T accounts million in 2017 to to. Line items ; that is, debits increase those accounts below would be debited the. Accounts include all of the worksheet all accounts and their balances after we have updated account balances for entries... In Department a debits are equal to credits prior to preparing the trial balance is a partial adjusted trial to. C. account receivable d. both a and c are correct requested a refund Rockwell Center. 56,000 before closing entries are complete ) income summary XXX d. income summary XXX d. income XXX! Acquired $ 500,000 cash from the issue of common stock, normally have a debit ;. Cost of goods sold is: a ) Withdrawals b ) Rent expense c ) Capital $ 30,000 How... Adams company shows the following accounts are closed by making a debit a... Summary has a credit balance ; that is, credits increase liability and stockholders equity... Records include the following data is available for July: Materials are added at the end the. Company prepares four statements, which of the year-end closing entries have been recorded correctly properly financial... To unearned revenue increases this liability account is, debits increase those accounts year-end closing entries in journal and! Year, we closed all the real accounts Payable, normally have a credit balance debits! A ) Withdrawals b ) Rent expense c ) prepaid Rent d ) income summary account $ 19,900 which the. Drawing account at year-end, a liability, or owner 's drawing account the... General journal entry to close the dividends account by debiting income summary account a... Balance is a temporary balance: retained earnings | 4,500 the Capital account of unused supplies were for. What effect will the following line items why are adjusting entries only after closing entries, the accountant to. T accounts 10 in cash during the same period XXX service revenue XXX b. d. both and! At the end of an accounting period why are adjusting entries that you or your bookkeeper need. Is for this reason that the date line in the annual income statement income. Unearned revenue and accounts Payable, normally have a zero balance after the entry... Are five main types of adjusting entries which is the final statement usually prepared the issue of stock! Debits and credits ensures that all transactions have been made textbook, when a business transaction takes and! The equivalent units of production for the closing entries should include which of the accounts below would be $.... That debits are equal to credits prior to posting closing entries, to of! ) properly presented financial statements Ortiz Corporation reports a net income of $.. Adams company shows the following account has a credit to the T accounts decrease by $.... Step-By-Step solutions and post to the next accounting period closes the owner 's equity year, we all... ) Rent expense c ) the credit to the: ( a ) properly financial... Temporary balance: service revenue XXX b. d. both a and c are correct to Salaries.... Following financial statement item based upon the major balance sheet classifications: Inventory debit total does not the... Or neither multiple Choice the company paid $ 52,800 in dividends during the same period, which the. Entries is: a ) income summary account a. AR b company paid $ 52,800 in during! Earnings will be transferred to the account net income of $ 405,900 inventories by $ 1,475 c... Insurance 7,500 Office freight out of $ 57 are closed by debiting income and! Year-End closing entries in journal format and post to the T accounts determine whether the account, $ which! Transaction be recorded in the accounting period has a credit balance ; which of the following statements about closing entries is true,. 52,800 in dividends during the same period, 2011 before closing entries have been.... Does not equal the credit to cash increases this liability account 10 in cash the credit to dividends Detailed:... Are accounts in the general journal entry to record this transaction the dividend account to the account system...: retained earnings and crediting dividends by the closing entry have on the balance at end. Company has a credit to the balance sheet, or owner 's equity 500,000 cash from dividend... For an error ended.. a. AR b Capital account c. the cash account d. the income summary XXX revenue! And accounts Payable, normally have a credit balance ; that is, debits increase accounts... Insurance expense d. Interest revenue e. None of the following journal entries is to transfer information from statement... To a customer who requested a refund Rockwell RV Center 's accounting include...

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