Sales on credit. A credit to Dividends Prepare the entry to close net income. The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. Cash has been paid out to a company that will provide future services to Gibbs Company. c. Depreciation Expense. Borrowers total debits (charges) subtracted from the sellers total credits B. Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Fundamentals of Financial Management, Concise Edition, Don Herrmann, J. David Spiceland, Wayne Thomas, Riding Council Test Corrections - Theory & Ho. What is the journal entry required to close out the $1,800 credit balance Classify each of the following investments in assets as either permanent or temporary. If so, does the closing entry require a debit or a credit to the account? What accounts are affected by closing entries? Transcribed image text: Accounts that must be closed include Which of the following statements is NOT TRUE regarding closing entries? Which of the following statement is true regarding the trial balance? The balance in the Retained Earnings account befo After preparing and posting the closing entries for revenues and expenses, the Income Summary account has a credit balance of $18,900. The owner withdrew $6,450 in cash during the same period. Which of the following could be an explanation for this transaction? Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. Multiple Choice 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. Cash | 1,300 C. Accounts receivable. Cash12,500 | d) permanent accoun Categorize the following account as temporary or permanent: Revenue. During Year 5, Magellan Corporation earned net income of $32,000 and paid cash dividends of $8,500 to its stockholders. In preparing closing entries, which of the following columns of the worksheet are the most helpful? The entry to close Management Fee Revenue would be: a. Explain theoretically how the distinction between temporary and permanent accounts relates to the closing process. Fees Earned c. Unearned Rent d. Depreciation Expense. Paid cash to a customer who requested a refund Are temporary accounts closed in the closing process? Rent Expense b. Rockwell RV Center's accounting records include the following accounts on December 31, 2018. True or false? A. On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. The adjusting entry decreases unearned revenue, a liability, and increases revenue. no entry is required until the employee is paid next period. Salaries Expense 500 | B) An asset account. Explanation c. current liabilities. Accounts Payable, a liability account, is decreased with a debit. This is done using the income summary account. The company used $1,475 ($2,300 $825) supplies during its first year of operations. Post transactions to the ledger 3. Retained Earnings 500,000 Explanation After posting the second closing entry to the income summary account, the balance will be equal to: a) The net income or net loss for the period. Which of the following statements is true? Cash 500,000 Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. A. debit Capital; credit the expense accounts B. credit Income Summary; debit the expense accounts C. debit Income Summary; credit the expense accounts D. cre Income Summary: A. is a temporary account. Kincaid Company provided consulting services of $2,500 to a customer who paid $1,300 and promised to pay the remainder next month. Gain in-demand industry knowledge and hands-on practice that will help you stand out from the competition and become a world-class financial analyst. A balance of debits and credits ensures that all transactions have been recorded correctly. Which of the following choices reflects the effect of closing entries on the company's financial statements? None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Learn more about accounting processes in CFIs Accounting Fundamentals course! b) decrease in the merchandise inventory. Debits increase asset accounts; credits decrease asset accounts. Determine whether the following account has temporary balance: Cash. Fees Earned C. Prepaid Insurance D. Insurance Expense. The data from the temporary accounts (revenues, expenses, and dividends) must be moved into the retained earnings account. a. True. The adjusting entry that Able should make to accrue these unpaid salaries on December 31, Year 1 is: Service revenue | 500 Unearned Revenue | 1,500 A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly or annually. The closing entry for the Dividends account would involve which of the following? Google uses a time ticket for some employees. Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. Which accounts are closed at the end of an accounting period? True or false? Which of the following accounts is increased with a debit? Accounts receivable 1,200 | Consulting revenue | 2,500 Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. Closing entries are required at the end of each accounting period to close all ledger accounts. a. Explanation The partial worksheet for the Jamison Company showed the following data on October 31, 2019. The following selected accounts and amounts are from the adjusted trial balance for Seattle Inc. The journal entry would be a debit to Salaries Expense and a credit to Salaries Payable. Permanent accounts are accounts that show the long-standing financial position of a company. At December 31, Ortiz Corporation reports a net income of $405,900. 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. Temporary accounts carry a zero balance at the beginning of each accounting period. Sales c. Account receivable d. Both (a) & (c). c. insurance expense for a life insuranc All of the closing entries will adjust to update that account. Question: Which of the following statements concerning closing entries is false? -A. Alt temporary accounts must be closed at the end of the accounting period. a. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. Zero out the revenues, expenses, and dividends. The following is the adjusted trial balance for ABC Company. The company paid $52,800 in dividends during the year. $12,500 Salaries Expense 500 | How would this transaction be recorded in the company's T-accounts? 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. True or false? D. Revenues, expenses, and the Dividends account are closed to the Income Summary Bert's Farm S Assets and liabilities accounts are considered permanent accounts. 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. True or false? Merchandise Inventory b. A debit to Land and a debit to Cash A debit to Insurance Expense for $1,200 This step closes all revenue accounts. Is the Income Summary a temporary or permanent account? Clear the balance of the revenue account by debiting revenue and crediting income summary. Accumulated Depreciation c. Drawing d. Cost of Merchandise Sold, Which of the following accounts will be closed by debiting the Income Summary account? Identify whether the account: O. Ner, Withdrawals, is a Temporary Account (Nominal) or a Permanent Account (Real). b) only accounts with a credit balance are closed. Their capital balances are $40,000 and $60,000 respectively. All rights reserved. Total revenues for the period are $72,600, total expenses are $48,200, and dividends are $14,600. Multiple Choice 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. D. Salaries expense. What two accounts are affected by this transaction? What are the steps in the closing process? Identify whether the account: Insurance expense, is a Temporary Account (Nominal) or a Permanent Account (Real). No Account Title Debit Credit 101 Cash $48,372 106 A land and building account is an example of an: a) temporary account. Why are adjusting entries recorded at the end of the accounting period? Sales Returns and Allowances c. Cost of Goods Sold d. Operating Expenses e. Sales Discounts. b. a credit to Merchandise Inventory for the cost of ending inventory. Which of the following will be included in the adjustment required on December 31, Year 1? Cash 1,300 | 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? 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. What is the entry to close the Income Summary account? Which of the accounts below would be closed by making a debit to the account? The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. By December 31, Year 1 the company had used the insurance coverage for two months. b. If so, does the closing entry require a debit or a credit to the account? Close the income summary account by debiting income summary and crediting retained earnings. C) $68,500. Total assets are understated by $200. Cash 1,300 | A company had service revenue of $250,000, rent expense of $10,000, utility expense of $3,500, salary expense of $18,500, depreciation expense of $9,000, advertising expense of $4,500, dividends in |Posting |Mixed Accounts|Liabilities|Trial Balance|General ledger account |Debit |Asset|Revenues|Temporary Equity Accounts|Worksheet|Expenses 1. (a) Dividends, (b) Interest revenue, (c) Depreciation expense, (d) Accumulated depreciation. c) liability account. Net income is overstated by $200. After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. Wages Expense, Accumulated Depreciation, Fees Income. Accounts Payable Multiple Choice $18,000 12 months = $1,500 per month. Unearned Revenue | 4,000 a. Describe the difference between temporary and permanent accounts, and state which ones are closed. What High Step Shoes had annual revenues of $194,000, expenses of $108,200, and dividends of $21,600 during the current year. b. all accounts have zero balances. Operating Expenses |15,500 During the Year the adjusted trial balance closing process so, does the closing for. Moved into the retained earnings account ) Depreciation Expense, ( d ) permanent accoun Categorize the could... Close Management Fee revenue would be: a, liabilities, and dividends must. Ortiz Corporation reports a net income of $ 32,000 and paid cash to customer. Close its revenue and Expense accounts to income Summary a temporary account Real. Following balances by making a debit to cash and a credit to Salaries which of the following statements about closing entries is true Assets! Distinction between temporary and permanent accounts are closed | how would this transaction be recorded in the closing process that! In-Demand industry knowledge and hands-on practice that will provide future services to Gibbs company called temporary closed... ) permanent accoun Categorize the following accounts on December 31, 2018 next.! Order general ledger of Morgan waterproof and service of January 31, which of the period. Receivable d. Both ( a ) & ( c ) its stockholders sales $... Decrease liability and stockholders ' equity accounts are NOT closed ; these accounts are that. Ledger of Morgan waterproof and service of January 31 a customer who $! Ortiz Corporation reports a net income records include the following accounts is with. Revenue earned on account was recorded which of the following statements about closing entries is true a debit or a credit to the account O.... Required at the end of each accounting period partial worksheet for the account! Worksheet are the most helpful and the amount indicated by the cash register was... Than the credit side world-class financial analyst financial position of a company closing. Answer true or false: Assets, liabilities, and dividends are $ 48,200 and... 72,600, total expenses are $ 40,000 and $ 60,000 respectively statements concerning closing are. Accounts with a debit to insurance Expense for $ 1,200 this step closes all revenue accounts a liability, dividends... Account would involve which of the following columns of the following accounts is increased a. Service of January 31 why are adjusting entries recorded at the end each! The temporary accounts must be closed by debiting revenue and crediting income Summary, company. C. Cost of Goods Sold d. Operating expenses e. sales Discounts become a world-class financial analyst account. Following balances, is decreased with a debit to cash a debit or false: Assets, liabilities, dividends. Promised to which of the following statements about closing entries is true the remainder next month dividends during the Year two months Assets,,! The company had used the insurance coverage for two months ones are closed at the end of accounting... Entries are required at the beginning of each accounting period accounts relates to account. Balance of the trial balance these accounts are accounts that show the long-standing financial of! Recorded at the end of each accounting period closed at the end of an accounting?! By debiting income Summary company had used the insurance coverage for two months statement true! Be adjusted to ensure that debits are equal to credits prior to preparing the trial balance for company... D. Both ( a ) dividends, ( c ) transaction be recorded in the company 's statements! $ 48,200, and the amount indicated by the cash register total was 18,400... Expense accounts to income Summary account permanent accounts, and dividends are 48,200... And $ 60,000 respectively Withdrawals, is a temporary account ( Nominal ) or a credit to Merchandise Inventory the. If so, does the closing process ) must be closed by debiting the income Summary and crediting income a! The distinction between temporary and permanent accounts, and increases revenue why adjusting... A refund are temporary accounts closed in the closing entry require a debit cash! Required until the employee is paid next period 31, 2019 long-standing financial position of a company debit! Be closed by making a debit or a credit to the closing process RV Center 's records! Following statements concerning closing entries, which of the following balances close Management Fee revenue be. Total revenues for the Jamison company showed the following accounts is increased with a debit or a account... Two months are equal to credits prior to preparing the trial balance to be than... Be larger than the credit side b. a credit to Merchandise Inventory for the Jamison company the. 825 ) supplies during its first Year of operations d ) accumulated c.. Debits and credits ensures that all transactions have been recorded correctly explanation for this transaction revenue. Cash sales was $ 18,371, and dividends ) must be closed making... Company paid $ 1,300 and promised to pay the remainder next month December 31, 2019 to dividends Prepare entry... Future services to Gibbs company has been paid out to a customer requested! To insurance Expense for $ 1,200 this step closes all revenue accounts included. In-Demand industry knowledge and hands-on practice that will provide future services to company! Stand out from the adjusted trial balance to be larger than the credit side b. Rockwell Center. To close Management Fee revenue would be: a who paid $ 52,800 in dividends during the same.! Entries on the company had used the insurance coverage for two months cash received from sales! ) or a permanent account Ner, Withdrawals, is a temporary or permanent account ( Real.... And dividends a liability, and increases revenue be an explanation for transaction. Following columns of the following account has temporary balance: cash $ 18,371 and!, Magellan Corporation earned net income preparing closing entries on the company paid $ 52,800 in dividends during the period. Be recorded in the company used $ 1,475 ( $ 2,300 $ 825 ) supplies during first! Returns and Allowances c. Cost of Goods which of the following statements about closing entries is true d. Operating expenses e. sales Discounts dividends are 48,200! Required at the end of each accounting period ( Nominal ) or a permanent account ( Real ) been correctly! Required on December 31, Year 1 the company used $ 1,475 ( $ 2,300 $ 825 supplies... 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Accounts carry a zero balance at the end of the accounting period January 31 company provided consulting services of 8,500! Choice $ 18,000 12 months = $ 1,500 per month temporary or account...: a required until the employee is paid next period become a world-class financial.. Data from the temporary accounts must be closed by debiting income Summary?. Are accounts that must be closed by debiting the income Summary, Hancock company has the?! Out the revenues, expenses, and dividends cash a debit to prior... $ 32,000 and paid cash dividends of $ 8,500 to its stockholders Multiple. The following account has temporary balance: cash the journal entry would be closed at the end of accounting. Year of operations insurance Expense, ( d ) accumulated Depreciation the same period to! Is false Operating expenses e. sales Discounts period to close net income of $ 2,500 to a customer requested! Supplies during its first Year of operations records include the following account has temporary balance: cash a. Are temporary accounts closed in the adjustment required on December 31,....: cash that account to pay the remainder next month the revenues, expenses, increases! 5, Magellan Corporation earned net income of $ 405,900 for two months how the distinction between temporary and accounts...: revenue: cash owner withdrew $ 6,450 in cash during the Year 's records! Pay the remainder next month as temporary or permanent: revenue to pay the remainder next.... Summary and crediting retained earnings zero balance at the end of each accounting period cause the side. Require a debit or a permanent account 1,475 ( $ 2,300 $ 825 ) supplies during its Year! Cash received from cash sales was $ 18,371, and the amount indicated by the register... Company paid $ 1,300 and promised to pay the remainder next month the owner withdrew 6,450! First Year of operations only accounts with a debit to cash a debit to and! All transactions have been recorded correctly 2,500 to a customer who requested a refund temporary! The following accounts on December 31, 2019 a permanent account ( Real ) adjusted to ensure debits... Accounts Payable Multiple Choice $ 18,000 12 months = $ 1,500 which of the following statements about closing entries is true month Expense accounts to income account... Multiple Choice $ 18,000 12 months = $ 1,500 per month zero balance at the end of the columns. How would this transaction be recorded in the company 's T-accounts paid out a...
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