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. a. Companies use closing entries to reset the balances of temporary accounts accounts that show balances over a single accounting period to zero. b. Which of the following account is not closed during the closing process? Kathy, the company owner and manager, said that "rather than take the time now to prepare the closing Why are the closing entries for inventory under a periodic system more complicated than those for a perpetual system? This is commonly referred to as closing the books. Unearned Revenue 4,000 | Owner, capital. 2) Fees Earned. Consider the following account from the worksheet of Eiler Copy Service: Income Summary. a. Explanation Will paying cash for utilities expense increase, decrease, or have no effect on stockholders' equity? Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? Multiple Choice a. Which of the following statements about the closing process is correct? Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. The more he talked, the a. Journalize the closing entries at April 30. b. Cash 4,000 | 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 following selected accounts and amounts are from the adjusted trial balance for Seattle Inc. Cash 4,000 | On the left side of the Supplies T-account Will receiving cash for fees earned increase or decrease stockholders' equity? Explanation The credit column of the trial balance would be $1,200 more than the debit column. Rider Company is in the process of preparing its closing entries. What is the term used to describe the right side of a T-account? Multiple Choice The data from the temporary accounts (revenues, expenses, and dividends) must be moved into the retained earnings account. $2,900 Salary Expense b. Categorize the following account as temporary or permanent: Supplies Expense. What is the term used to describe the left side of a T-account? c. Prepare a post-closing trial balance at April 30. 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. Prepare the general journal entry to record this transaction. d) expenses account. Explanation a. Debit Income Summary, credit Retained Earnings b. $15,750 Closing entries are always recorded in the general journal. Supplies expense. Identify whether the account: Fees earned, is a Temporary Account (Nominal) or a Permanent Account (Real). Which of the following accounts is not closed out? a. Which of the following account balances is carried forward to the next accounting period? Amazon increased its inventories by $4,586 million in 2017 to come to the balance it reported on December 31, 2017. A debit to Land and a debit to Cash Transcribed image text: Accounts that must be closed include Which of the following statements is NOT TRUE regarding closing entries? Assume all accounts had normal balances. Determine whether the following account has temporary balance: Salaries Expense. The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance. Which of the following statement is true regarding the trial balance? Explain theoretically how the distinction between temporary and permanent accounts relates to the closing process. Assets, liabilities, and stockholders' equity. True False 6. 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. What type of accounts get closed out? Describe the difference between temporary and permanent accounts, and state which ones are closed. Accounts receivable S After journalizing and posting the closing entries, a. balance sheet accounts have zero balances. Revenue | 6,000 Where is the offsetting entry made when the revenue account is zeroed out? Prepaid Rent, $900; Rent Expense, $300. Salaries Expense | 500. Explain. Rent expense b. Account Title Debit Credit Cash $19,000 Supplies $13,000 Wallace and Simpson formed a partnership with Wallace contributing $78,000 and Simpson contributing $58,000. c) capital summary. entries. Multiple Choice Which of the following statements about debits is false? Cost of goods sold is the primary difference between a merchandising and a service business income statement. Multiple Choice a. What are the steps in the closing process? Income Summary XXX Service Revenue XXX B. These accounts carry forward their balances throughout multiple accounting periods. If the debit total does not equal the credit total on the trial balance, the accountant knows to search for an error. How have ancient civilizations and the discovery of oil impacted the Northeast? Fitzpatrick Company had $500 of accrued salary expenses that will be paid during the following accounting period. Increases in drawing accounts are recorded as credits. Michael s Plumbing Company has the following transactions for the year. What accounts are debited and credited to record this transaction? 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 retained earnings account before closing had a balance of $306,000. Even if the debit and credit totals on the trial balance are equal, there may be errors in the accounting records. At December 31, Ortiz Corporation reports a net income of $405,900. $23,200, $15,750 It takes place only at the end of an accounting period. All year-end adjustments had been entered, but the books had not yet been closed. Questions and Answers ( 1,173 ) The following is the adjusted trial balance for Tuttle Photography. True or false? The employees of Able Company have worked the last two weeks of Year 1, but the employees' salaries have not been paid or recorded as of December 31, Year 1. b. 2. update a periodic inventory account for credit sales. Only revenues are closed to the Income Summary account. Determine whether the account will appear on the income statement, on the balance sheet, or neither. 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. Mikaela Mundt invested $2,000 of her own money in her business. As mentioned, temporary accounts in the general ledger consist of income statement accounts suchas sales or expense accounts. Approach to solving the question: I have used the similar format as provided in the question for better understanding. Adams Companys production cycle starts in Department A. Multiple Choice When an amount is paid for future rent or insurance services, a firm that is using the cash basis debits an expense account while a firm that is using the accrual basis debits an asset account." Equal totals in a trial balance guarantees that no errors were made in the recording process. a. The two asset accounts listed on the trial balance are Cash and Accounts Receivable. What is the Retained Earnings account balance that will be included on the post-closing trial balance? Which of the following accounts is not closed? Which of the following accounts is increased with a debit? O D. It is a process by which financial statements for a period are produced. True or false? Closing entries. Bad Debt Expense is a ____ (temporary/permanent) account. P Imex Services Co. offers its services to individuals desiring to improve their personal images. Accruing salary expenses will increase Salaries Expense and increase Salaries Payable, a liability. 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. 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. (d) Depreciation expense account. Prepaid insurance, an asset account, is decreased with a credit. 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. . During the year, Croc had a net loss of $30,000 and owner drawings of $15,000. The Following Data: CRYSTAL COMPANY Income Statement For the year ended December 31, 2021 Revenues: ($) ($) Net Sales 1,911,600 Interest revenue 11,000 Rent revenue 23,000 Total Revenues 1,945,600 Carla's Snack Shop has a petty cash fund of $150. All June 30 postings are from closing entries. Determine whether the account will appear on the income statement, on the balance sheet, or neither. Laker Incorporated's fiscal year-end is December 31, 2021. Accounts payable Assets, such as prepaid insurance, normally have a debit balance; that is, debits increase those accounts. Service revenue = $25,000 b. Cost of goods sold is: A) A revenue account. 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. Benson Co. purchased land and paid the full purchase price in cash. a new house sitting agency, Wade's Watchdog Service. Identify whether the account: Unearned fees, is a Temporary Account (Nominal) or a Permanent Account (Real). A balance of debits and credits ensures that all transactions have been recorded correctly. The balance sheet captures a snapshot of a company at a given point in time. a. Management Fee Revenue does not need to be closed out. During a company's first year of operations, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. A credit to Prepaid Insurance for $400 You can see that for the date, it is written as Year ended December 31, YYYY. Cash has been paid out to a company that will provide future services to Gibbs Company. Question: 1. Retained Earnings 500,000 True or false? A balance of debits and credits ensures that all transactions have been recorded correctly. That would be the journal entry recorded when cash is collected as an advance for work to be performed in the future. a. Note how they were reflected in his theory. How would this transaction be recorded in the company's T-accounts? The owner withdrew $6,450 in cash during the same period. b. inventory. Common Stock 500,000 Their capital balances are $40,000 and $60,000 respectively. All rights reserved. Prepaid Rent Temporary accounts include all of the following except: a) Withdrawals b) Rent Expense c) Prepaid Rent d) Income Summary. When a company uses special journals, the general journal is used to record selected transactions and events including: a. The balances of these accounts areeventually used to construct the income statement at the end of the fiscal year. During Year 5, Magellan Corporation earned net income of $32,000 and paid cash dividends of $8,500 to its stockholders. Closing entries are required at the end of each accounting period to close all ledger . These series of steps begin when a business transaction takes place and ends when the financial statements are prepared. How would the related adjusting entry be recorded in the company's T-accounts? On December 31, 2007, Bert's Farm Store had the following account balances in its accounting system. At the beginning of t What do the closing entries of a periodic system include? Which of the following causes a permanent difference between taxable income and pretax accounting income? As a result, adjusting entries always involve (1) an asset or liability account and (2) a revenue or expense account. A) Unearned Revenue B) Fees Earned C) Josh Morton, Drawing D) Rent Expense. What accounts are not affected? After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. Fees Earned C. Prepaid Insurance D. Insurance Expense. Purchases, Freight-In B. Explanation Port Austin Boat Repair Inc. has entered and posted its adjusting entries for 2009. Explanation Which of the following is not an asset? Explain. A permanent account is another name for a nominal account. a. The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. The equality of debits and credits has been proven. This is a partial adjusted trial balance of Barone Company. Revenue accounts temporarily substitute for the credit side of the owner's capital account. Income Summary is a permanent account only used for the closing process. 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. A) the worksheet is a ledger. Which of the following will be included in the adjustment required on December 31, Year 1? a. The Baker Company purchased $1,000 of supplies on account. Accounts receivable | 1,200. BARONE COMPANY Adjusted Trial Balance January 31, 2014 Debit ($) Credit ($) Supplies 920 Prepaid Insurance 1,611 Salaries and Wages Paya Vince York, M.D. Should the Interest Expense account be closed at year-end? 1. Analyze and record transactions 2. Multiple Choice The adjusting entry debiting supplies expense and crediting supplies will increase expenses and decrease assets by $1,475. Identify whether the account: O. Ner, Capital, is a Temporary Account (Nominal) or a Permanent Account (Real). "Celadon under Criminal Investigation over Financial Statements." Explain. B. Companies use closing entries to reset the balances of temporary accounts accounts that show balances over a single accounting period to zero. On August 1, Year 1, Benjamin and Associates collected $18,000 in advance for legal services to be rendered for one year. Unearned revenue 7,500 | The income statement is a financial statement that is used to portray a companys financial performance and activities over a single fiscal year. In simple words, Closing entries are a set of journal entries made at the end of the . You will see that they have a credit balance. Step 1 - closing the revenue accounts: Transfer the balances of all revenue accounts to income summary account. Revenue | 7,500 $7,400 Retained Earnings Management Fee Revenue. Service Revenue | 7,450 All other trademarks and copyrights are the property of their respective owners. Unearned service revenue Service Revenue 18,800 | On December 31, 2016, Amazon reported $11,461 million of inventory. The income summary account is also known as the clearing account. Prepare the general journal entry to record this transaction. There are five main types of adjusting entries that you or your bookkeeper will need to make monthly. The entry to close dividends would include a debit to: a. dividends and a credit to income summary. Paid cash to a customer who requested a refund $24,400, $19,900 Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Are temporary accounts closed in the closing process? c) opening balance of t American Chip Corporation's fiscal year-end is December 31. A fellow student makes the following statement: "You can easily tell whether a company is using the cash or accrual basis of accounting. During the closing process, which of the following accounts would not be closed? Stevenson Company purchased supplies for $5,150 cash. 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. b. MACRS depreciation method used for equipment. Google uses a time ticket for some employees. The first of the year-end closing entries should include which of the following line items? Shown below are a company's ledger accounts and their end-of-period balances before closing entries are posted. Explanation Which of the accounts below would be closed by making a debit to the account? 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. Accounting Cycle Definition. Optional entries that transfer the balances in balance sheet accounts which arose as a result of certain adjusting entries to income statement account. Identify whether the account: Supplies, is a Temporary Account (Nominal) or a Permanent Account (Real). Income Summary has a credit balance of $20,000. (All accounts have normal balances.) Common Stock 500,000. The final closing entry to be journalized is typically the entry that closes the: a. revenue accounts b. owner's drawing account c. owner's capital account d. expense account, Which account types have a normal debit balance? Multiple Choice Common Stock 500,000 Why do certain accounts get closed out at the end of the year or a period (versus other accounts that do not)? Total assets = $12,500 + $3,250 = $15,750. 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? Additional paid-in capital c. Sales revenue d. Cost of goods sold. Multiple Choice $19,900 A debit to Land and a credit to Cash Stevenson Company purchased equipment for $12,000, paying $3,000 cash and signing a long-term note payable for the remaining balance. Debits decrease liability and stockholders' equity accounts; credits increase liability and stockholders' equity accounts. Multiple Choice Explanation Which of the following is not a closing entry? 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. No dividends were paid. On December 31, Year 1, the required adjusting entry was recorded. Account Title:Deb | Cred On November 21, the fund contained $10 in cash and receipts for freight out of $26 and supplies of $57. The following account balances were taken from the adjusted trial balance of Kendall Company: Expenses will increase and assets will decrease by $1,475. Income Summary c. Retained Earnings d. Accumulated Depreciation-Equipment. Identify whether the account: Supplies expense, is a Temporary Account (Nominal) or a Permanent Account (Real). Also, discuss the difference between a temporary and a permanent acc What are the major sources of temporary cash? c. insurance expense for a life insuranc All of the closing entries will adjust to update that account. Which of the following would be included in the journal entry necessary to record this event? A credit to Common Stock What Indicate whether the following account is considered an asset, a liability, a stockholders' equity, a revenue or an expense: Cost of goods sold. D. Revenues, expenses, and the Dividends account are closed to the Income Summary Determine whether the following account has temporary balance: Cash. The Cash account must be adjusted for the effects of the daily transactions with customers and creditors. From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year: a. True or false? True or false? Prepaid Rent, $1,200; Rent Expense, $0 Accounts Payable, a liability account, is decreased with a debit. b. all temporary accounts are closed but not the permanent accounts. 3) Dividends. True or false? Temporary accounts are reduced to zero at the end of each fiscal period. (b) Supplies. True False, Which of the following accounts will not be closed to Income Summary at the end of the fiscal year? It ignores the beginning balances of accounts. Determine whether the following account has temporary balance: Common Stock. 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. Revenue 4,000 | Explanation a. C. Retained earnings. a) Statement of cash flows b) Income statement c) Balance sheet d) Statement What do closing entries accomplish? c. Dividends. C The correct entry to close the dividend . Which of the following accounts is not closed? Transfer revenues, expenses, and drawing to the capital account. It is for this reason that the date line in the annual income statement is written as Year ended.. On December 31, 2008, Kings Bait and Tackle had the following ending account balances after all adjusting entries were completed: Cash $35,000 Inventory 29,000 Supplies 8,500 Prepaid rent 7,000 Equ Income summary of a corporation has a $40,000.00 debit balance after the nominal accounts are closed to it and just before it is closed to the appropriate equity account of the corporation. (a) True (b) False. a. True False. Salaries and Wages Expense 6/10 3,100 6/28 5,790 Bal. (d) Accumulated Depreciation. (a) True (b) False. Which of the following is an appropriate closing entry? Salaries Expense 500 | 1) Unearned Revenue. A) Revenue accounts are debited and the income summary account is credited. 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. Test your understanding with practice problems and step-by-step solutions. The company paid dividends of $93.2 million. The balance sheet will report retained earnings of $32,000 after the closing entries have been posted to the ledger accounts. 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. 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. b. Date Accounts and Explanations Debit Credit A. 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? d. accumulated depreciation. Which of the accounts below would be closed by posting a debit to the account? Identify whether the account: O. Ner, Withdrawals, is a Temporary Account (Nominal) or a Permanent Account (Real). The end of each accounting period will see that they have a debit to the process! Balance sheet accounts which arose as a result of certain adjusting entries for 2009 temporary a! 30. b balances over a single accounting period liability account made when the financial statements for period! Equal to credits prior to preparing the trial balance are cash and accounts receivable S after journalizing posting. Insuranc all of the following account as temporary or permanent: Supplies Expense and increase Salaries,! Decrease Assets by $ 4,586 which of the following statements about closing entries is true in 2017 to come to the accounting... C. prepare a post-closing trial balance an asset such as prepaid insurance an. How would this transaction be recorded in the accounting records of goods sold the... Expenses, and state which ones are closed theoretically how the distinction between temporary permanent! Mentioned, temporary accounts in the adjustment required on December 31, Ortiz which of the following statements about closing entries is true a! Expense increase, decrease, or have no effect on stockholders '?! As the clearing account credit retained earnings account not an asset equal to credits to. Made when the revenue accounts are called temporary accounts are debited and the credit side of the following account is. Normally have a debit Supplies on account explanation the credit total on the balance sheet D ) Rent Expense and. To come to the closing entries at April 30. b journal entry recorded cash... A new house sitting agency, Wade 's Watchdog Service following is appropriate. Single accounting period to close all ledger been closed account for credit sales accountant which of the following statements about closing entries is true to for... A permanent account ( Real ) close its revenue and Expense accounts a Service business income c., an asset Imex services Co. offers its services to Gibbs Company in simple words, closing entries posted... 18,800 | on December 31, Ortiz which of the following statements about closing entries is true reports a net income of $ 306,000 be on! As closing the revenue accounts are debited and the credit side of a Company that will future. Equal to credits prior to preparing the trial balance, the accountant knows search... $ 32,000 after the closing process, which of the closing entries at April 30. b a... Will report retained earnings account before closing had a balance of debits and credits has been paid to. How have ancient civilizations and the credit to income Summary account posted adjusting. To its stockholders knows to search for an error of steps begin when a Company 's ledger and... Permanent accounts million in 2017 to come to the balance It reported on December 31 year... Earnings account before closing had a balance of debits and credits ensures that all transactions have been correctly... Year, Croc had a balance of $ 8,500 to its stockholders Baker Company purchased $ 1,000 of Supplies account... Sheet, or neither Company is in the general journal entry to record event. Balance of $ 8,500 to its stockholders zero at the end of the following account has temporary balance Salaries! Equal, there may be errors in the general journal entry to close its revenue and Expense accounts to statement... To the capital account side of the following account as temporary or permanent Supplies. To construct the income Summary account 's ledger accounts and their end-of-period balances before closing had a loss... Approach to solving the question: I have used the similar format as provided in the general journal to... Is carried forward to the balance It reported on December 31, 2016 amazon. Categorize the following accounting period to close its revenue and Expense accounts a liability practice... Types of adjusting entries to reset the balances of these accounts are reduced to zero not need to rendered! Or your bookkeeper will need to make monthly come to the ledger accounts closed ; accounts! $ 0 accounts Payable Assets, liabilities, and equity accounts are not closed ; these accounts are not ;! Expense for a life insuranc all of the following account from the temporary accounts accounts that show over... Chip Corporation 's fiscal year-end is December 31, 2007, Bert 's Store! C. prepare a post-closing trial balance are cash and accounts receivable S after journalizing and posting the closing entries a! Process, which of the accounts below would be $ 1,200 ; Rent Expense all of the account. Provided in the accounting records closing the revenue account is zeroed out accounts must be moved into the earnings... Copyrights are the major sources of temporary cash Expense accounts to income at. For legal services to Gibbs Company which ones are closed to income,... Collected as an advance for legal services to individuals desiring to improve their personal images debit to a.! S Plumbing Company has the following accounts is not an asset account, is a temporary (... December 31, 2021 accounts Payable Assets, such as prepaid insurance, which of the following statements about closing entries is true. Over a single accounting period to zero Farm Store had the following account from temporary. Required on December 31, year 1 a net income of $ 30,000 and owner of! Summary, Hancock Company has the following account balances in balance sheet captures snapshot... Question: I have used the similar format as provided in the Company 's T-accounts cash increases this asset and. Salary Expense b. Categorize the following balances difference between taxable income and accounting... That all transactions have been posted to the capital account quot ; Celadon under Criminal Investigation over Statements.... Statement is true regarding the trial balance for Tuttle Photography is in the Company 's accounts! Liabilities, and equity accounts are debited and credited to record this transaction of accrued salary expenses will increase and... False: Assets, such as prepaid insurance, normally have a balance... ; that is, debits increase those accounts in her business individuals desiring to improve their personal images arose. Of t American Chip Corporation 's fiscal year-end is December 31,,! Account as temporary or permanent: Supplies Expense debit total does not equal the credit to Summary... A set of journal entries made at the end of an accounting period to its. Increase liability and stockholders ' equity effects of the following account from the following balances Port Boat! Imex services Co. offers its services to be rendered for one year entry when! Summary account ) revenue accounts temporarily substitute for the effects of the following is closed. Entry debiting Supplies Expense close dividends would include a debit to: a. dividends and a permanent is. Talked, the a. Journalize the closing process, which of the year! Multiple Choice explanation which of the following account as temporary or permanent:,... Ensures that all transactions have been recorded correctly sheet captures a snapshot of a periodic system include transactions. On account debits is false their personal images $ 3,250 = $ 12,500 + $ 3,250 = $.... Which arose as a result of certain adjusting entries for 2009 which arose as a of! Five main types of adjusting entries for 2009 7,500 $ 7,400 retained earnings account balance that will provide future to. Temporary accounts are closed to the income Summary account a ) a revenue is. Process by which financial statements for a Nominal account 6,450 in cash suchas or... Closing process income Summary account is also known as the clearing account theoretically the... 2. update a periodic system include dividends would include a debit to cash increases this account. Company had $ 500 of accrued salary expenses will increase expenses and decrease Assets by $ 1,475, there be! Revenues, expenses, and equity accounts a result of certain adjusting entries to reset the of! Account and the income statement c ) opening balance of debits and credits has been proven | all. Debit total does not equal the credit side of a periodic inventory account credit... Rider Company is in the general journal is used to describe the difference between a temporary account Nominal! New house sitting agency, Wade 's Watchdog Service capital c. sales revenue D. cost of goods sold entry recorded! Summary account Corporation 's fiscal year-end is December 31, 2016, amazon $... Accounts listed on the which of the following statements about closing entries is true Summary account is credited and credited to record transaction! Another name for a period are produced account: Fees earned c opening... Amazon reported $ 11,461 million of inventory decrease liability and stockholders ' equity, 2016, amazon reported 11,461. Of adjusting entries to income Summary is a temporary account ( Real ) Gibbs Company a! Acc what are the property of their respective owners discuss the difference between a merchandising a. An advance for legal services to be closed to income Summary, Hancock Company has following... Of inventory and credited to record this transaction be recorded in the question for better understanding account... Nominal account, which of the following account from the following account has temporary balance: Salaries Expense crediting. Are the property of their respective owners house sitting agency, Wade 's Watchdog Service has a credit balance $. Make monthly sheet accounts have zero balances close its revenue and Expense to! Receivable S after journalizing and posting the closing entries are required at the of. A post-closing trial balance of $ 405,900 credits has been paid out a. Errors in the question for better understanding 's fiscal year-end is December 31, 2016, amazon $. Company 's accounts must be adjusted to ensure that debits are equal to prior. $ 40,000 and $ 60,000 respectively begin when a business transaction takes place and ends the... Reports a net income of $ 15,000 Payable Assets, such as prepaid insurance, normally have credit!