b. a. From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year: a. Bad Debt Expense is a ____ (temporary/permanent) account. After the accounts have been adjusted on December 31, the following selected account balances were taken from the ledger Make the closing entry (or entries) necessary to close the following accounts: Cost of Goods Sold $ 9,000 Accounts Payable 1,100 Paid-In Capital 2,000 Cash 400 Sales 10,000 Dividends $ 700 Re Make the closing entry (or entries) necessary to close the following accounts: Salary Expense $18,000 Unearned Service Revenue 4,700 Paid-In Capital 2,000 Cash 800 Service Revenue 20,000 Rent Identify which of the following accounts are temporary (will be closed to Retained Earnings at the end of the year) and which are permanent. Categorize the following account as temporary or permanent: Contributed Capital. Categorize the following account as temporary or permanent: Land. (d) Accumulated Depreciation. Even if the totals are equal, however, there may be errors in the accounting records. To close net income to the owner's capital, the income summary is debited and the owner's capital is credited. Received cash in advance for work to be performed in future months If so, does the closing entry require a debit or a credit to the account? Revenue | 7,500 Test your understanding with practice problems and step-by-step solutions. Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). b. (Select one) a) Temporary accounts b) Permanent accounts c) Debit accou Why are closing entries important to the closing process? Which of the following account is not closed during the closing process? On August 1, 2012, Ken Wade created. The following is the Statement of Retained Earnings for Printing Plus. Assume a company has a net income that exceeds the owner's drawing for the current year. Retained Earnings 17,000 On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. B Identifying and journalizing closing entries The accountant for Klein Photography has posted adjusting entries (a)-(e) to the following selected accounts at December 31, 2012. J.Mark, Capital $30,000 J.Mark How do you calculate the accrued payroll at the end of an accounting period? Should the Dividends account be closed at year-end? The income summary is used to transfer the balances of temporary accounts to retained earnings, which is a permanent account on the balance sheet. Cost of goods sold is: A) A revenue account. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. Explain. Explain theoretically how the distinction between temporary and permanent accounts relates to the closing process. During the current year, the partnership net income was $40,000. Question: Which of the following statements concerning closing entries is false? Operating Expenses |15,500 (d) Depreciation expense account. D. Revenues, expenses, and the Dividends account are closed to the Income Summary The worksheet for Adams Company shows the following in the financial statement columns. It is recorded as a debit to unearned revenue and a credit to the revenue account. Cost of goods sold is the primary difference between a merchandising and a service business income statement. This indicates that Gibbs has collected cash for services to be provided in the future. What two accounts are affected by this transaction? Analyze and record transactions 2. Multiple Choice T Identify whether the account: Depreciation expense - Building, is a Temporary Account (Nominal) or a Permanent Account (Real). The owner of a company withdrew $1,500 cash for personal use. Common Stock 500,000. a. Which of the following journal entries correctly records this transaction? d. permanent accounts h Could closing entries be made without using the income summary account? After all revenue and expense accounts have been closed at the end of the fiscal year, Income Summary has a debit of $315,000 and a credit of $449,500. Prepaid Rent, $300; Rent Expense, $900 c. current liabilities. Prepare the general journal entry to record this transaction. a. net income b. income summary c. dividends d. assets. 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 Utilities Expense B. The following is the adjusted trial balance for ABC Company. Both assets and stockholders' equity increase. 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. Is the Income Summary a temporary or permanent account? Multiple Choice 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. At December 31, Ortiz Corporation reports a net income of $405,900. The more he talked, the a. Journalize the closing entries at April 30. b. What is the entry to close the Income Summary account? Adjusting entries are recorded after the closing entries have been recorded. In other words, the temporary accounts are closed or reset at the end of the year. Closing entries move the balances from the ____ accounts into the Retained Earnings account. There are five main types of adjusting entries that you or your bookkeeper will need to make monthly. Step-by-step explanation. Prepaid Rent, $0; Rent Expense, $1,200 Explanation The six steps of the accounting cycle: 1. Prepare adjusting entries at the end of the period 5. c. Dividends. Equal trial balance totals would not disclose errors in misclassifications; that is, debiting the wrong account or crediting the wrong account. Temporary accounts are accounts in the general ledger that are used to accumulate transactions over a single accounting period. Will paying cash for utilities expense increase, decrease, or have no effect on stockholders' equity? What accounts are not affected? b. After the accounts have been adjusted at October 31, the end of the fiscal year, the following balanc A Company had revenues of 75,000 and expenses of 62,000 and paid 1,000 dividends for the accounting period. It ignores the beginning balances of accounts. Below is an example ofAmazons 2017 annual income statement. B. Identify whether the account: Fees earned, is a Temporary Account (Nominal) or a Permanent Account (Real). c) all accounts are closed. Prepaid Rent, $900; Rent Expense, $300. Closing entries, also called closing journal entries, are entries made at the end of an accounting period to zero out all temporary accounts and transfer their balances to permanent accounts. Credits increase the common stock account. Sales Revenue 2. Which of the following accounts is not closed out? The equality of debits and credits has been proven. Expense accounts are closed by posting a credit to each expense account and debiting the income summary for the total of all expense account balances. The following account balances were taken from the adjusted trial balance of Kendall Company: Revenue 4,000 | What is the purpose of the Income Summary account? A. Debit the drawing account, credit the income summary account. d. Retained Earnings. The debit column of the trial balance would be $1,200 more than the credit column. (a) True (b) False. Multiple Choice O D. It is a process by which financial statements for a period are produced. A fellow student makes the following statement: "You can easily tell whether a company is using the cash or accrual basis of accounting. The entry to close dividends would include a debit to: a. dividends and a credit to income summary. a. What are the four steps necessary to complete the closing process? Why do certain accounts get closed out at the end of the year or a period (versus other accounts that do not)? Adams Companys production cycle starts in Department A. The journal entry would be a debit to unearned revenue and a credit to revenue. Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. The entry to close the appropriate insurance account at the end of the accounting period is: a. debit Income Summary; credit Prepaid Insurance. Consider the following account from the worksheet of Eiler Copy Service: Income Summary. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Closing entries with net income after all revenue and expense accounts have been closed at the end of the fiscal year. B) False. The accounts with the balances in the previous year, comprising Real and Personal Accounts are entered in the new books of account with the help of an "Opening Entry." A credit to Retained Earnings Identify whether the account: Insurance expense, is a Temporary Account (Nominal) or a Permanent Account (Real). C The correct entry to close the dividend . True False. Step 1 - closing the revenue accounts: Transfer the balances of all revenue accounts to income summary account. All year-end adjustments had been entered, but the books had not yet been closed. Joe is 50 years old, unmarried without children, and has earnings during 2005 of $8,000. Which of the following is not a closing entry? True or false? Goodwill b. 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. Fees Earned c. Cash d. Supplies e. Equipment. Identify whether the account: Rent expenses, is a Temporary Account (Nominal) or a Permanent Account (Real). Learn Accounting. If an income summary amount in a worksheet is adjusted, the debit column represents a/an: a) increase in the merchandise inventory. How would the trial balance column totals be affected if a $600 credit to Service Revenue was erroneously posted as a $600 debit to Salaries Expense? Johnson, Inc. paid rent expense of $3,500 for the month of October. Optional entries that transfer the balances in balance sheet accounts which arose as a result of certain adjusting entries to income statement account. Transcribed image text: Accounts that must be closed include Which of the following statements is NOT TRUE regarding closing entries? Which of the following accounts would not be included in the closing entries? Explanation b) only accounts with a credit balance are closed. The closing entry for the Dividends account would involve which of the following? Should the Accumulated Depreciation account be closed at year-end? Companies use closing entries to reset the balances of temporary accounts accounts that show balances over a single accounting period to zero. What accounts are debited and credited to record this transaction? Cash 1,300 | Multiple Choice Multiple Choice The income statement is prepared using the post-closing trial balance. 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. Google uses a time ticket for some employees. Below is an excerpt from Amazons 2017 annual balance sheet. A credit to Common Stock Rent Expense. The monthly rent is $100 ($1,200 12 months). The income statement is prepared using the adjusted trial balance. Accumulated Depreciation c. Drawing d. Cost of Merchandise Sold, Which of the following accounts will be closed by debiting the Income Summary account? Salary Expense b. b. Create an account to browse all assetstoday. Assets, liabilities, and the owner's capital . Cash | 500 Advance collection of revenues. Discuss the purpose for the closing process and describe the four closing entries that are required to be made in that process. Cash 1,300 | What High Step Shoes had annual revenues of $194,000, expenses of $108,200, and dividends of $21,600 during the current year. Prepaid insurance a. True or false? Interest Expense 3. a. The journal entry would be a debit to Salaries Expense and a credit to Salaries Payable. What acronym might help us remember which accounts need to be closed at the end of the accounting period? The capital account c. the cash account d. the income summary account. The general ledger of the Karlin Company, a consulting company, at January 1, 2018, contained the following account balances: Account Title Debits ($) Credits ($) Cash 33,500 Accounts receivable 10 At January 1, Croc Industries reported owner's capital of $140,000. List of Excel Shortcuts Revenue accounts temporarily substitute for the credit side of the owner's capital account. b) Revenues for the period. Which of the following accounts would not be included in the closing process at year-end? On December 31, Year 1, the required adjusting entry was recorded. What effect will the following closing entry have on the retained earnings account? A debit to Land and a credit to Cash. The December 31, 2019, adjusted trial balance of Business Solutions (reflecting its transactions from October through December of 2019) follows. Can't find the question you're looking for? A credit to Dividends Identify at least three permanent and three temporary accounts a business would have and explain why each account is classified as such. Using the weighted-average method, what are the equivalent units of production for the month of July? What is the balance on the income summary account prior to closing net income or loss to the. Prepare an adjusted trial balance 6. Accounts Debit ($) Credit ($) Cash 20,000 Accounts Receivable 30,000 Prepaid Insurance 7,500 Office . Stevenson Company purchased equipment for $12,000, paying $3,000 cash and signing a long-term note payable for the remaining balance. Explanation On a closing statement the amount of cash a buyer needs to close a real estate transaction is BEST defined as the: A. a. All June 30 postings are from closing entries. True or false? Land purchased with cash was recorded with a debit to the Land account and a credit to Accounts Payable. 3) Dividends. (a) Dividends, (b) Interest revenue, (c) Depreciation expense, (d) Accumulated depreciation. Identify whether the account: Supplies expense, is a Temporary Account (Nominal) or a Permanent Account (Real). A balance of debits and credits ensures that all transactions have been recorded correctly. Learn to read financial statements in CFIs free reading financial statements course! 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. Explanation a. Clear the balance of the expense accounts by debiting income summary and crediting the corresponding expenses. A debit to Insurance Expense for $1,200 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. Total liabilities are overstated by $200. Should the Sales Returns and Allowances account be closed at year-end? Cash has been paid out to a company that will provide future services to Gibbs Company. Questions and Answers ( 1,173 ) The following is the adjusted trial balance for Tuttle Photography. Additional paid-in capital c. Sales revenue d. Cost of goods sold. Accounts Payable b) decrease in the merchandise inventory. 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