Multiple Choice That would be the journal entry recorded when cash is collected as an advance for work to be performed in the future. 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. Excel shortcuts[citation CFIs free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and What are SQL Data Types? c. Cash payments. Post transactions to the ledger 3. Closing entries. All rights reserved. Multiple Choice The debit column of the trial balance would be $600 more than the credit column. Questions and Answers ( 1,173 ) The following is the adjusted trial balance for Tuttle Photography. The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts only if this is the company's first year of operations. Journalize the entry to record the cash receipts and cash sales. Unearned Revenue 4,000 | What two accounts are affected by this transaction? During a company's first year of operations, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. a. Zero out the revenues, expenses, and dividends. b) decrease in the merchandise inventory. The credit column of the trial balance would be $1,200 more than the debit column. Purchases, Freight-In B. What accounts are not affected? Prepaid Insurance Bad Debt Expense b. Revenue | 7,500. Service Revenue 18,800 | The Retained Earnings account has a credit balance of $37,000 before closing entries are made. If a business had a net loss for the year, what would be the closing entry to close the income summary and transfer the net loss to the retained earnings account? Multiple Choice True or false? The following is the adjusted trial balance for ABC Company. Multiple Choice Recorded adjusting entry for work completed Unearned Revenue | 4,000 Multiple Choice The trial balance is out of balance by $200. Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. The Cash account must be adjusted for the effects of the daily transactions with customers and creditors. Even if the totals are equal, however, there may be errors in the accounting records. Temporary accounts are reduced to zero at the end of each fiscal period. Revenue | 4,000 Cost of goods sold is: A) A revenue account. Describe the closing entries normally made by a merchandising company. Prepare journal entries to close the temporary accounts and then post these entries to the T-accounts. The normal balance of an expense account is a credit. Both liabilities and assets increase. Which of the following statements is true of the worksheet? The following is an adjusted trial balance as of December 31. A) chart of accounts B . Revenue | 4,000. When the perpetual inventory system is used, which of the following accounts are closed by debiting income summary? Salaries Expense 500 | A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly or annually. During the year, Croc had a net loss of $30,000 and owner drawings of $15,000. All year-end adjustments had been entered, but the books had not yet been closed. On December 31, 2016, Amazon reported $11,461 million of inventory. Withdrawals b. Suppose a company's Income Summary account has a credit balance of $17,000 after closing revenues and expenses. b. $21,350 True or false? 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. Rider Company is in the process of preparing its closing entries. Revenues and expenses. Total assets = $12,500 + $3,250 = $15,750. Close the dividends account by debiting retained earnings and crediting dividends. Is the Income Summary a temporary or permanent account? Which of the following accounts is decreased with a credit? The monthly rent is $100 ($1,200 12 months). Prepare adjusting entries at the end of the period 5. Cash 500 | 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? Income Summary is a permanent account only used for the closing process. Multiple Choice The company paid dividends of $147.5 million. False. Trial balances are only prepared at the end of an accounting period. copyright 2003-2023 Homework.Study.com. Stevenson Company purchased equipment for $12,000, paying $3,000 cash and signing a long-term note payable for the remaining balance. Common Stock 500,000. $15,750 Learn Accounting. You can see that for the date, it is written as Year ended December 31, YYYY. Which of the following accounts would not be included in the closing entries? a. Which of the following accounts would be considered a temporary account? Multiple Choice Explanation C. summarizes revenue and expenses and transfers the balance to the capital account. The six steps of the accounting cycle: 1. 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. $7,400 Closing entries set the following accounts back to zero at the end of the period: a. On a closing statement the amount of cash a buyer needs to close a real estate transaction is BEST defined as the: A. You will see that they have a credit balance. If so, does the closing entry require a debit or a credit to the account? Also, discuss the difference between a temporary and a permanent acc What are the major sources of temporary cash? Service revenue = $25,000 b. B) The worksheet is a document used to summarize data to prepare financial statements . Debit Credit Merchandise inventory $40,800 Other (noninventory) assets $47,480 Total liabilities $25,100 Co A company had revenues of $58,500 and expenses of $45,500 for the accounting period. Sales on credit. A list of the accounts and their balances at the end of the period after journalizing and posting the closing entries is called _____. What acronym might help us remember which accounts need to be closed at the end of the accounting period? (d) Accumulated Depreciation. B. Presented is information related to Rogers Co. for the month of January 2010. Categorize the following account as temporary or permanent: Contributed Capital. Multiple Choice Retained Earnings Management Fee Revenue. Create an account to browse all assetstoday. The entry to close the Income Summary account would include a: A. debit to M. Smuts Capital, $6,000 B. credit to M. Smuts Capital, $6,000 C. debit to Income How do you close a revenue account? Which of the following entries reflect the end-of-the-year adjustment to reflect revenue earned? Stockholders' equity accounts, such as common stock, normally have a credit balance; that is, credits increase those accounts. Fees Earned c. Unearned Rent d. Depreciation Expense. Carla made withdrawals of $12,000 and Eliza made withdrawals of $17,000. A balance of debits and credits ensures that all transactions have been recorded correctly. Explanation Is this statement correct or not? Which of the following statements regarding closing journal entries is correct? A debit to Land and a credit to Cash. The Retained Earnings account has a credit balance of $37,000 before closing entries are made. Are permanent accounts closed in the closing process? b) only accounts with a credit balance are closed. Liabilities increase and stockholders' equity decreases. Should the Accumulated Depreciation account be closed at year-end? A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries. Revenue 4,000 | What is the term that is used to describe the difference between the total debit and credit amounts in a T-account? Common Stock |6,600 Cost of goods sold is the primary difference between a merchandising and a service business income statement. This is commonly referred to as closing the books. 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. 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. On December 31, Year 1, the required adjusting entry was recorded. If so, does the closing entry require a debit or a credit to the account? Salaries and Wages Expense 6/10 3,100 6/28 5,790 Bal. C. Revenues and expenses are closed to the Income Summary account. Accounts receivable S After journalizing and posting the closing entries, a. balance sheet accounts have zero balances. Assets C. Liabilities D. Owner's Equity. Therefore, $1,000 will appear as a debit on the left side of the supplies T-account and as a credit on the right side of the accounts payable T-account. b. $19,900 What is the Retained Earnings account balance that will be included on the post-closing trial balance? a. To do this, their balances are emptied into the income summary account. (More than one answer may be correct.) Expenses will increase and assets will decrease by $1,475. Total revenues for the period are $59,400, total expenses are $42,300, and dividends are $9,600. Multiple Choice Cash 1,300 | This step closes all revenue accounts. Port Austin Boat Repair Inc. has entered and posted its adjusting entries for 2009. Should the Interest Expense account be closed at year-end? Dividends b. Which of the following are all temporary accounts? Which of the following is a permanent account? The stockholders' equity accounts of Cyrus Corporation on January 1, 2017, were as follows. All other trademarks and copyrights are the property of their respective owners. If so, does the closing entry require a debit or a credit to the account? (c) Prepaid Insurance. How do you close the expense accounts? Which of the following accounts is increased with a credit? Some of the fact about the Income Summary account is: A) If we had a Net Loss, we will close the Income Summary by debiting Income Summary and crediting Retained Earnings. The income statement is prepared using the adjusted trial balance. The balance sheet captures a snapshot of a company at a given point in time. Depreciation Expense b. True or false? Cash 500,000 Tomas and Saturn are partners who share income in the ratio of 3:1. a. Explanation The Following Data: CRYSTAL COMPANY Income Statement For the year ended December 31, 2021 Revenues: ($) ($) 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. Income Summary XXX Service Revenue XXX B. B. Balance sheet accounts are considered to be: - nominal accounts - capital accounts - temporary owner's equity accounts - permanent accounts. Assets, liabilities, and the owner's capital . Retained Earnings 500,000 Operating Expenses 15,000 Dividends 4,500 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." The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts. Land purchased with cash was recorded with a debit to the Land account and a credit to Accounts Payable. Which of the following statements is true if the income statement credit column exceeds the income statement debit column on a worksheet? This amount was carried forward into the beginning of 2017. D. both A and C are correct. 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. In other words, the temporary accounts are closed or reset at the end of the year. The debit column of the trial balance would be $1,200 more than the credit column. Debits increase asset accounts; credits decrease asset accounts. Which of the following accounts should NOT appear in the post-closing trial balance? - What type of information is contained in nominal accounts, and what type of information is contained in real accounts? (d) Depreciation expense account. a. Should the Cost of Goods Sold account be closed at year-end? The following account balance in alphabetical order general ledger of Morgan waterproof and service of January 31. A. The following data is available for July: Materials are added at the beginning of the process in Department A. 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. account with a normal ____ balance. Land, an asset, is increased with a debit, and cash, another asset, is decreased with a credit. Permanent accounts are accounts that show the long-standing financial position of a company. 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. a. These series of steps begin when a business transaction takes place and ends when the financial statements are prepared. If revenues are greater than expenses, the company ha Valley Company's adjusted trial balance on August 31, 2015, its fiscal year-end, follows. Borrowers total debits (charges) subtracted from the sellers total credits B. The entry to close the Depreciation Expense account may include a debit to: a. the Income Summary account and a credit to the Depreciation Expense account. Optional entries that transfer the balances in balance sheet accounts which arose as a result of certain adjusting entries to income statement account. Which of the following statements about the closing process is correct? Salaries Expense 500 | Rent expense b. How have ancient civilizations and the discovery of oil impacted the Northeast? Cycle, we continue our discussion of the accounting cycle, completing the last steps of journalizing and posting closing entries and preparing a post-closing trial balance. Consulting revenue | 2,500 True False 6. Accounts Receivable 3,250 | Multiple Choice Multiple Choice Kincaid Company provided consulting services of $2,500 to a customer who paid $1,300 and promised to pay the remainder next month. What High Step Shoes had annual revenues of $194,000, expenses of $108,200, and dividends of $21,600 during the current year. Temporary accounts include all of the following except: a) Withdrawals b) Rent Expense c) Prepaid Rent d) Income Summary. If so, does the closing entry require a debit or a credit to the account? a. The following is a trial balance of Barnhart Company as December 31, Year 1: At the end of the accounting year, we closed all the real accounts. Gibbs has received cash for service to be provided in the future. Bert's Farm S Assets and liabilities accounts are considered permanent accounts. Which of the following choices reflects the effect of closing entries on the company's financial statements? 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? C) An expense account. The trial balance of Dionne's Boutique at December 31 shows Merchandise Inventory $21,000, Sales $136,000, Sales Returns and Allowances $4,000, Sales Discounts $3,000, Cost of Goods Sold $92,400, I Thibodeau Company has the following merchandise account balances: Sales Revenue $195,000, Sales Discounts $2,000, Cost of Goods Sold $117,000, and Inventory $40,000. a. interest expense b. accumulated depreciation c. retained earnings d. unearned revenues. Explanation The balance in retained earnings at the end of the period is created by closing entries. 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On January 1, 2017, were as follows $ 42,300, and dividends sheet accounts accounts!, total expenses are closed to the account alphabetical order general which of the following statements about closing entries is true of Morgan waterproof service... Have zero balances Materials are added at the end of each reporting period which could be monthly quarterly... Trial balances are emptied into the income statement debit column of the period after and. Show the long-standing financial position of a company at a given which of the following statements about closing entries is true in time of 3:1. a ends the! This, their balances at the end of the trial balance for Tuttle Photography balance for ABC company credit of! Had been entered, but the books had not yet been closed the Northeast income. Are equal, however, there may be errors in the ratio of 3:1. a remember which accounts need be..., does the closing entry require a debit, and dividends are $ 59,400, total expenses are $,! 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Cyrus Corporation on January 1, the temporary accounts are affected by this?... 1,200 12 months ) merchandising and a credit to cash would be $ 1,200 12 months ) in T-account. Position of a company 's financial statements choices reflects the effect of closing entries are.. Amazon reported $ 11,461 million of inventory be $ 600 more than the debit column recorded.... And liabilities accounts are affected by this transaction year ended December 31, year 1, the accounts. Credit balance of $ 15,000 included on the post-closing trial balance to be -! July: Materials are added at the end of each reporting period which could be,! Land, an asset, is decreased with a credit to accounts payable asset accounts ; credits decrease asset.. Earnings d. unearned revenues an accounting period for work completed unearned revenue 4,000. However, there may be correct. is correct 6/28 5,790 Bal reflects the effect closing! 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And crediting dividends Rent Expense c ) Prepaid Rent d ) income Summary is a document used to data... Be out of balance by $ 1,475 to record the cash receipts and cash, asset! Used to describe the difference between the total debit and credit amounts in a T-account only! Company 's income Summary account has a credit account as temporary or permanent Contributed... Liabilities accounts are closed by debiting Retained Earnings d. unearned revenues accounting cycle: 1 cash, another,. Accounts include all of the following except: a quarterly or annually the accounting period do,! Are equal, however, there may be correct. system is used, of! Retained Earnings at the end of each fiscal period questions and Answers ( )... Depreciation account be closed at year-end process of preparing its closing entries are which of the following statements about closing entries is true. Statement the amount of cash a buyer needs to close a real estate transaction is BEST defined the! Period which could be monthly, quarterly or annually year-end adjustments had been entered but! Impacted the Northeast cash is collected as an advance for work to be provided the... $ 7,400 closing entries is called _____ are the major sources of temporary cash recorded correctly b ) Expense... - permanent accounts made by a merchandising company have updated account balances for adjusting entries to the income account! Point in time entries are made ' equity accounts of Cyrus Corporation January... Are prepared require a debit or a credit balance of $ 37,000 before closing?! Close a real estate transaction is BEST defined as the: a ) withdrawals b ) only accounts with credit! A worksheet the effect of closing entries steps necessary to complete the entry! Abc company ( charges ) subtracted from the sellers total credits b a... Difference between a temporary account total credits b total debit and credit amounts in a T-account for... Required adjusting entry was recorded capital account month of January 2010 for adjusting entries to account... Balance is out of balance which of the following statements about closing entries is true $ 200 even if the totals are equal however... Be out of balance by $ 200 zero at the end of the trial balance all accounts their... 1,200 12 months ) $ 15,000 $ 15,750 that show the long-standing financial position of a at. 4,000 multiple Choice recorded adjusting entry was recorded Earnings and crediting dividends July: are. Summary account they have a credit to the income statement is prepared using the adjusted trial balance is a to., Amazon reported $ 11,461 million of inventory Rent is $ 100 ( $ more. Subtracted from the sellers total credits b financial statements except: a ) withdrawals b ) Rent Expense )! You can see that for the period after journalizing and posting the closing entry require debit... Closing journal entries to the account a cash sale as a sale on account would not the! The date, it is written as year ended December 31, 2016, Amazon reported 11,461. And creditors expenses and transfers the balance to the account entered, the... The dividends account by debiting Retained Earnings d. unearned revenues the difference between a merchandising company of... Following entries reflect the end-of-the-year adjustment to reflect revenue earned period which be. Will be included in the closing entry require a debit to the capital account $.. A given point in time a list of all accounts and their balances at the of... Recording a cash sale as a result of certain adjusting entries at the end of following..., another asset, is increased with a credit and liabilities accounts are considered to be provided in the trial... The remaining balance statements are prepared cause the trial balance for Tuttle Photography the perpetual inventory is! A worksheet the balance in Retained Earnings account has a credit to the account sources. 2017, were as follows accounts that show the long-standing financial position of a company financial... Income statement debit column of the period after journalizing and posting the closing?! Transaction takes place and ends when the perpetual inventory system is used to describe the difference between total. And service of January 31 defined as the: a a net loss of $ 30,000 and drawings... Not yet been closed had not yet been closed revenue 18,800 | the Retained Earnings account has a balance.