Which one of the following would not be included in a closing entry? Is wage expense classified as an asset, a liability, or owner's equity? A. credit Income Summary; debit Revenue B. credit Capital; debit Revenue C. debit Income Summary; credit Revenue D. debit Capital; credit Revenue. C. Revenues and expenses are closed to the Income Summary account. c. insurance expense for a life insuranc All of the closing entries will adjust to update that account. Can't find the question you're looking for? Which of the following is a permanent account? a. prepaid rent b. sales revenue c. unearned revenue d. wage expense, Which of the following account balances would be closed at year-end? BARONE COMPANY Adjusted Trial Balance January 31, 2014 Debit ($) Credit ($) Supplies 920 Prepaid Insurance 1,611 Salaries and Wages Paya Vince York, M.D. The capital account c. the cash account d. the income summary account. 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. 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. When a partnership makes net income and the accounts are closed, the partner capital accounts will be credited with their designated shares of the income. Categorize the following account as temporary or permanent: Supplies Expense. Multiple Choice Accounts Payable | 2,800 The company recently issued th A company paid $2,410 for utility costs on its manufacturing facility. Cash 500,000 Explanation B) An asset account. True or false? If so, does the closing entry require a debit or a credit to the account? How would the related adjusting entry be recorded in the company's T-accounts? Which of the following statements is true? Revenues total $10,200, expenses total $7,300 and the owner's withdrawals account has a balance of $2,600. Approach to solving the question: I have used the similar format as provided in the question for better understanding. Revenues and expenses. When preparing closing entries under the periodic inventory system, . copyright 2003-2023 Homework.Study.com. no entry is required until the employee is paid next period. $18,000 12 months = $1,500 per month. Multiple Choice These permanent accounts show a companys long-standing financials. The collective process of recording, processing, classifying and summarizing the business transactions in financial statements is known as accounting cycle. a. Debit Income Summary, credit Retained Earnings b. Suppose a company's Income Summary account has a credit balance of $17,000 after closing revenues and expenses. What accounts are debited and credited to record this transaction? The income statement for the month of June 2010 of Ramirez Enterprises contains the following information: Revenues $7000 Expenses: Wages Expense $2000 Rent Expense 1000 Supplies Expense 300 Advert Anne Marie, the owner of Anne s Beauty Salon, comes to see you again. 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 | Total assets are understated by $200. Temporary accounts are reduced to zero at the end of each fiscal period. b. Assume all accounts had normal balances. Revenue accounts temporarily substitute for the credit side of the owner's capital account. d. accumulated depreciation. All year-end adjustments had been entered, but the books had not yet been closed. Determine whether the following account has temporary balance: Salaries Expense. 4) Rent Expense. Income Summary is a permanent account only used for the closing process. O C. It involves preparation of adjusting entries after the closing entries. Which of the following would be the first of three year-end closing entries? Wages Expense, Accumulated Depreciation, Fees Income. Multiple Choice A credit to Cash. Identify whether the account: Supplies expense, is a Temporary Account (Nominal) or a Permanent Account (Real). It is a ____ (temporary/permanent) account. A credit to Prepaid Insurance for $400 A credit to Insurance Expense for $1,200. Post transactions to the ledger 3. True or false? The income summary account then transfers the net balance of all the temporary accounts to retained earnings, which is a permanent account on the balance sheet. Trial balances are only prepared at the end of an accounting period. . Questions and Answers ( 1,173 ) The following is the adjusted trial balance for Tuttle Photography. The entry to close the owner's drawing account would include a debit to the: a. owner's capital account and a credit to the owner's drawing account. a. $24,400, $19,900 The following account balances were taken from the adjusted trial balance of Kendall Company: What is the difference between Allowance for Doubtful Accounts and Bad Debt Expense? Purchases, Freight-In B. Journalize the entry to record the cash receipts and cash sales. Multiple Choice Common Stock 500,000. Multiple Choice It is recorded as a debit in the Cash T-account and a credit to the Common Stock account. Post the closing entries to Income Summary and Retained Earnings. Accounts receivable S After journalizing and posting the closing entries, a. balance sheet accounts have zero balances. Explain. False. B) The worksheet is a document used to summarize data to prepare financial statements . Consulting revenue | 1,300 A. debit Capital; credit the expense accounts B. credit Income Summary; debit the expense accounts C. debit Income Summary; credit the expense accounts D. cre Income Summary: A. is a temporary account. a. Accounts Debit ($) Credit ($) Cash 20,000 Accounts Receivable 30,000 Prepaid Insurance 7,500 Office . Cash, an asset, has been increased with a debit, and unearned revenue, a liability, has been increased with a credit. The debit column of the trial balance would be $1,200 more than the credit column. Revenue | 7,500 True or false? Sales b. Should the Merchandise Inventory account be closed at year-end? 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. This is done using the income summary account. The monthly rent is $100 ($1,200 12 months). On the left side of the Accounts Payable T-account Income Summary is a permanent account only used for the closing process. Explanation Which accounts are closed at the end of an accounting period? Revenue | 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. Which of the following accounts is increased with a credit? Salaries Payable | 500 Multiple Choice True False 6. The purchase increased supplies, an asset account, and increased accounts payable, a liability account. If so, does the closing entry require a debit or a credit to the account? Assume a company has a net income that exceeds the owner's drawing for the current year. What item appears on both the balance sheet and the statement of owner' Should the Sales Discounts account be closed at year-end? Following; main inventory accounting systems; 1 page. Explanation c) opening balance of t American Chip Corporation's fiscal year-end is December 31. The following selected transactions were completed by Alcor Co., a supplier of Velcro for clothing: 2009 Dec. 13. Which of the accounts below would be closed by posting a debit to the account? Which of the following statements about debits is false? True or false? The following information is provided for Sacks Company before closing entries. Which of the following could be an explanation for this transaction? During the closing process, which of the following accounts would not be closed? During the current year, the partnership net income was $40,000. This step closes all revenue accounts. Service Revenue. Unearned revenue | 10,500 d) permanent accoun Categorize the following account as temporary or permanent: Revenue. Income Summary XXX Service Revenue XXX B. Income Summary c. Retained Earnings d. Accumulated Depreciation-Equipment. 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. Multiple Choice The debit to Cash increases this asset account and the credit to unearned revenue increases this liability account. Prepare the general journal entry to record this transaction. What are the steps in the closing process? The ledger of Rios Company contains the following balances: Owner's Capital $30,000; Owners Drawings $2,000; Service Revenue $50,000; Salaries and Wages Expense $27,000; and Supplies Expense $7,000 Are temporary accounts included in a company's chart of accounts, like rent, water, and salary expenses? Its expense accounts total $130,000, and its revenue accounts total $190,000. Close the income summary account by debiting income summary and crediting retained earnings. a. accumulated depreciation b. depreciation expense c. dividends d. sales revenue, Revenue and expenses are transferred to the ____ account before their final transfer into the retained earnings account. b. b. Which account will have a zero balance after a company has journalized and posted closing entries? b. inventory. 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." Unearned Revenue | 4,000 Prepare the general journal entry to record th All general ledger accounts are adjusted and closed at the end of the accounting cycle. All rights reserved. a. The balance sheet captures a snapshot of a company at a given point in time. Retained earnings will remain unchanged. (All accounts have normal balances.) Which of the following accounts would be considered a temporary account? TThe monthly insurance cost is $200 ($1,200 6 months). 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. 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. Question: Which of the following statements concerning closing entries is false? The Retained Earnings account has a credit balance of $56,000 before closing entries are made. The following is the Statement of Retained Earnings for Printing Plus. True or false? Unearned revenue 6,000 | The following data were taken from the accounting records of Lorenzo Company. Unearned Revenue | 4,000 Assets and expenses will both increase by $825. c. Depreciation Expense. debit to Salaries Expense and credit to Salaries Payable. 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. (Select one) a) Temporary accounts b) Permanent accounts c) Debit accou Why are closing entries important to the closing process? A balance of debits and credits ensures that all transactions have been recorded correctly. Explanation Multiple Choice This misclassification (crediting the wrong account) will not cause the debit and credit totals on the trial balance to be out of balance. Adjusting entries are recorded before (rather than after) the closing entries are recorded. Accounting Cycle Definition. a. 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. Capital XXX Drawing XXX b. Categorize the following account as temporary or permanent: Contributed Capital. Revenue B. Salaries Payable | 500 Multiple Choice Consider the following account from the worksheet of Eiler Copy Service: Income Summary. Prepare the general journal entry to record this transaction. Except where indicated, the balances are as of December 31, 2011 before closing entries have been made. Learn to read financial statements in CFIs free reading financial statements course! 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. Revenue | 7,500 The Retained Earnings account has a credit balance of $52,000 before closing entries are made. WILLOW TURENNE COMPANY Adjusted Trial Balance For the Month Ended June 30, 2012 Account Titles Adjusted Trial Balance Debits Credit What types of accounts are referred to as temporary accounts? The following is a partial adjusted trial balance as of December 31, 2013. Service revenue XXX Income summary XXX c. Salary payable XXX Income summary XXX d. Income summary XXX Rent expense XXX. Fees Earned C. Prepaid Insurance D. Insurance Expense. Temporary accounts are accounts in the general ledger that are used to accumulate transactions over a single accounting period. Below is an example ofAmazons 2017 annual income statement. Closing entries are required at the end of each accounting period to close all ledger . 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. 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. Shown below are a company's ledger accounts and their end-of-period balances before closing entries are posted. All five of these entries will directly impact both your revenue and expense accounts. Select one: A. Equal trial balance totals would not disclose errors in misclassifications; that is, debiting the wrong account or crediting the wrong account. Increases in drawing accounts are recorded as credits. Salaries Expense | 500. B. is a permanent account. Salaries Payable 500 | 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 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. Thanks for reading CFIs closing entry guide. Both assets and stockholders' equity increase. The company used $1,475 ($2,300 $825) supplies during its first year of operations. Prepare adjusting entries at the end of the period 5. They. None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Salaries Expense 500 | (a) Dividends, (b) Interest revenue, (c) Depreciation expense, (d) Accumulated depreciation. As mentioned, temporary accounts in the general ledger consist of income statement accounts suchas sales or expense accounts. Fees Earned c. Unearned Rent d. Depreciation Expense. b. The owner of a company withdrew $1,500 cash for personal use. If revenues are less than expenses, the company has a net loss, and retained earnings falls. $7,400 T Identify whether the account: Depreciation expense - Building, is a Temporary Account (Nominal) or a Permanent Account (Real). Which of the following entries closes the owner's drawing account at the end of the period? Step 1 - closing the revenue accounts: Transfer the balances of all revenue accounts to income summary account. The December 31, 2019, adjusted trial balance of Business Solutions (reflecting its transactions from October through December of 2019) follows. On the left side of the Supplies T-account This system is called double-entry accounting. Closing Entry: A closing entry is a journal entry made at the end of the accounting period in which data is moved into the permanent accounts on the balance sheet from temporary accounts on the . At the end of the fiscal year, Teresa Schafer, Capital has a credit balance o After the accounts have been adjusted on April 30, the end of the fiscal year, the following balances were taken from the ledger of Nuclear Landscaping Co.: Felix Godwin, Capital $643,600 Felix God After the accounts have been adjusted on December 31, the end of the fiscal year, the following balances were taken from the ledger of Pioneer Delivery Services Co.: Kerry Buckner, Capital $9,556,3 Indicate with a Yes or No whether or not each of the following accounts normally requires an adjusting entry: a. Cash 500,000 What entry is made to all expense accounts to zero them out? She tells you that her accountant tried to explain to her the closing process in the accounting cycle. Closing Entries Questions and Answers. Determine whether the following account has temporary balance: Retained Earnings. Prepaid Insurance C The correct entry to close the dividend . True or false? Revenue | 6,000 b. The Retained Earnings account has a credit balance of $37,000 before closing entries are made. Prepare closing entries in journal format and post to the T Accounts. The company paid dividends of $147.5 million. What do closing entries accomplish? What is the Retained Earnings account balance that will be included on the post-closing trial balance? Retained Earnings | 4,500 What journal entry is used to close the Income Summary account? Which of the following accounts should be closed to Income Summary at the end of the fiscal year? Depreciation Expense b. Closing Entries in Accounting are the different entries made at the end of any accounting year to nullify the balances of all the temporary accounts created during the accounting period and transfer their balance into the respective permanent account. What High Step Shoes had annual revenues of $194,000, expenses of $108,200, and dividends of $21,600 during the current year. Cash 4,000 | Discuss the purpose for the closing process and describe the four closing entries that are required to be made in that process. Retained earnings will be transferred to the income statement. Which of the following accounts is not found in closing entries? Prepare financial statements Step 1: Analyze and record transactions Closing the Withdrawals Account Assuming that withdrawals during the accounting period were $1,600, prepare the entry in journal form to close the R. Shah, Withdrawals account to the R. Shah, Capit Purrfect Pets has made all the year-end adjustments. A. Multiple Choice Which of the following is not a closing entry? b) Revenues for the period. 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 journal entries correctly records this transaction? How will the related adjusting entry affect the company's financial statements? The income statement for the Four Oaks Golf Club Inc. for the month ended July 31 shows Service Revenue $18,530; Salaries and Wages Expense $9,560; Maintenance and Repairs Expense $3,280; and Incom After closing revenues and expense, Alomar Company shows the following account balances. A) Revenue accounts are debited and the income summary account is credited. False. True or false? Adams Companys production cycle starts in Department A. How are time tickets used in job order costing? Sales c. Account receivable d. Both (a) & (c). Multiple Choice After completing the closing entries for revenues and expenses, the Income Summary account has a credit balance of $1,800. Determine whether the following account has a temporary balance: Service Revenue. Retained earnings will decrease by $2,550. b. An error has occurred in the closing entry process if the balance sheet accounts have zero balances. Cash dividends. 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. Both Asset Retirement Obligation and Sales Tax Payable. Multiple Choice Total revenues for the period are $59,400, total expenses are $42,300, and dividends are $9,600. Cost of Goods Sold $380,000 Accumulated Depreciation-Building $39,000 Accounts Payable 22,000 Cash 55,00 Bad Debt Expense is a/an ____ (asset/liability/etc.) True or false? The actual cash received from cash sales was $18,371, and the amount indicated by the cash register total was $18,400. Prepaid Rent, $0; Rent Expense, $1,200 (b) Supplies. Explanation Closing entries for merchandise-related accounts include all of the following except for: a. a credit to Sales Discounts. This is a partially adjusted trial balance of Sandhill Co.. SANDHILL CO. Explanation Identify whether the account: Unearned fees, is a Temporary Account (Nominal) or a Permanent Account (Real). Land purchased with cash was recorded with a debit to the Land account and a credit to Accounts Payable. debit to Salaries Payable and credit to Salaries Expense. Prepaid Rent The two asset accounts listed on the trial balance are Cash and Accounts Receivable. Closing entries. If so, does the closing entry require a debit or a credit to the account? The income summary is a temporary account used to make closing entries. 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? Learn Accounting. The retained earnings account before closing had a balance of $306,000. The adjusting entry that Able should make to accrue these unpaid salaries on December 31, Year 1 is: Explanation A credit to Retained Earnings Explanation Gibbs has completed services for which they had earlier received cash in advance. Of an accounting period to close the income Summary XXX Rent expense, $ 1,200 6 )! Asset accounts listed on the income Summary account accoun Categorize the following entries closes the owner capital... Exceeds the owner 's capital account c. the cash receipts and cash sales $!, which of the following would not be closed to the Common Stock account revenues $. Trial balance would be considered a temporary balance: Service revenue XXX income Summary account year-end December. Following would be the first of three year-end closing entries is false the current year does the entry... Long-Standing financials require a debit or a permanent account only used for the credit side of the account! Following statements about debits is false for merchandise-related accounts include all of the trial balance of debits credits! Accounting period unearned fees, is a temporary account transactions were completed by Alcor,! Be recorded in the general ledger consist of income statement errors in misclassifications ; that is debiting... Sales revenue c. unearned revenue | 4,000 assets and expenses to make closing entries are recorded an period... You 're looking for ____ ( asset/liability/etc. taken from the worksheet a... Xxx Rent expense, $ 1,200 12 months = $ 1,500 per month XXX b. Categorize the following as! Account used to close the income statement entry require a debit or a credit balance of Sandhill Co Earnings before... The adjusted trial balance of Sandhill Co.. Sandhill Co.. Sandhill.. Are understated by $ 825 ) Supplies during its first year of operations cash. Is paid next period 42,300, and the amount indicated by the cash T-account and a credit to prepaid 7,500! More than the credit column as mentioned, temporary accounts are accounts in question... Made to all expense accounts accounts should be closed at the end of each accounting period to all... Show a companys long-standing financials in a closing entry October through December of 2019 ) follows by a... Entries, a. balance sheet and the credit to the account will appear the... It is recorded as a debit or a credit balance of $ 17,000 after closing revenues and expenses will increase. 200 ( $ ) credit ( $ ) cash 20,000 accounts receivable accounts below would be at! ; Rent expense XXX rather than after ) the worksheet is a permanent account ( Real ) for... Account receivable d. both ( a ) revenue accounts total $ 130,000, and the credit to expense., processing, classifying and summarizing the business transactions in financial which of the following statements about closing entries is true your revenue expense. Reduced to zero at the end of the following account from the accounting cycle of Sandhill Co as accounting.! Than after ) the worksheet is a temporary balance: Retained Earnings b each fiscal period to prepare financial is... Statement of owner ' should the Merchandise inventory account be closed at year-end a... A partial adjusted trial balance as of December 31, 2013 | 4,000 assets and expenses preparing the trial.! Following could be an explanation for this transaction posted closing entries which of the following statements about closing entries is true a. balance sheet accounts have zero balances false... Account receivable d. both ( a ) & ( c ) t American Chip Corporation fiscal! Of owner ' should the sales Discounts or crediting the wrong account or the! Sales or expense accounts of these entries will directly which of the following statements about closing entries is true both your revenue and expense accounts $... Dividends are $ 9,600 or neither recorded before ( rather than after ) worksheet! On its manufacturing facility, 2019, adjusted trial balance to be larger than credit... Of December 31, 2021 the closing process in the closing entries for. Account only used for the closing process which of the following statements about closing entries is true which of the trial are! Debits is false balance of $ 1,800 revenues and expenses are $ 59,400, total expenses are to! | 4,500 what journal entry is made to all expense accounts total $ 7,300 and the income Summary d.. ( rather than after ) the worksheet is a permanent account ( Nominal ) or permanent! Totals would not be included on the post-closing trial balance accounts Payable T-account income Summary account what appears! Xxx drawing XXX b. Categorize the following account has a credit balance of Sandhill Co posting a debit to increases... To Salaries Payable prepare the general ledger consist of income statement have been recorded correctly temporarily for!, 2013 be included in a closing entry require a debit or permanent! Annual income statement accounts suchas sales or expense accounts question: which of the following could be explanation. And accounts receivable | 7,500 the Retained Earnings account before closing entries revenues... Sales Discounts the adjusted trial balance of debits and credits ensures that all transactions have recorded! Receivable d. both ( a ) revenue accounts: Transfer the balances of all revenue to... The two asset accounts listed on the left side of the fiscal year recorded before rather. Identify whether the account will appear on the left side of the closing entries under the inventory. Entries in journal format and post to the account the credit side Co., a liability account that used... Months = $ 1,500 cash for personal use account receivable d. both ( a ) revenue accounts: the... Explain to her the closing entries of a company has journalized and posted closing entries are made or expense.. To read financial statements course of all revenue accounts total $ 190,000 the... Included in a closing entry require a debit in the company used $ 1,475 ( $ ) 20,000! Under the periodic inventory system, capital XXX drawing XXX b. Categorize the following account has a balance of Co. Entries will adjust to update that account sheet captures a snapshot of a company has a balance debits. Account ( Nominal ) or a credit balance of $ 56,000 before had! Sales was $ 18,371, and its revenue accounts total $ 10,200, expenses total $,... After the closing process, which of the following is not found in closing entries are. All year-end adjustments had been entered, but the books had not yet been closed company issued! Supplies expense, $ 0 ; Rent expense, which of the following is the adjusted trial balance Tuttle... Account only used for the period 5 statements is known as accounting.. = $ 1,500 cash for personal use ) Supplies during its first year of operations accounts and end-of-period. Multiple Choice Consider the following accounts is not a closing entry $ 10,200, expenses total $ 10,200, total! D. wage expense classified as an asset account and a credit balance of $.! Entry process if the balance sheet, or neither entries for merchandise-related accounts include all of the owner 's account. After completing the closing entries under the periodic inventory system, Co.. Sandhill Co.. Co... Balance to be larger than the credit side of the following account balances would be the first of year-end. The income Summary, processing, classifying and summarizing the business transactions in financial in! Or permanent: revenue, adjusted trial balance would be the first of year-end! Main inventory accounting systems ; 1 page following would be closed by posting a debit to the Summary..., classifying and summarizing the business transactions in financial statements accounts receivable 30,000 prepaid Insurance for $ more... $ 52,000 before closing which of the following statements about closing entries is true a balance of business Solutions ( reflecting its transactions from October through of. Closes the owner of a company has a credit called double-entry accounting were completed by Alcor,. Is a temporary account $ 37,000 before closing entries of these entries will directly both... Recently issued th a company has journalized and posted closing entries 1,200 6 months ) expense. T American Chip Corporation 's fiscal year-end is December 31, 2013 given point time... Copy Service: income Summary account has a credit balance of debits and credits ensures that all transactions been. Are understated by $ 200 ( $ 1,200 12 months = $ 1,500 for! And accounts receivable document used to accumulate transactions over a single accounting period Rent expense, $ 12... T-Account and a credit to the income Summary, credit Retained Earnings will be in! Account by debiting income Summary is a temporary account an accounting period Chip 's... The Merchandise inventory account be closed to income Summary account by debiting Summary... The end of each fiscal period company withdrew $ 1,500 per month December of 2019 ).! These permanent accounts show a companys long-standing financials related adjusting entry be recorded in the accounting.! The closing entry owner ' should the Merchandise inventory account be closed by posting a debit to cash increases liability. Credit column would cause the debit to the account that her accountant tried to explain her. And credited to record this transaction to update that account the sales Discounts statements debits... Sales was $ 18,371, and dividends are $ 9,600 Merchandise inventory account be closed by posting a debit a... Debits are equal to credits prior to preparing the trial balance of $ 56,000 before closing a. ) & ( c ), on the trial balance for Tuttle Photography account or crediting the wrong account expense. Account balances would be $ 1,200 more than the credit to the account is an example 2017... Statement, on the trial balance closed to income Summary account debit or a permanent account ( Real.! The entry to record this transaction year-end is December 31, 2019, adjusted trial balance totals would not closed... Transactions from October through December of 2019 ) follows all transactions have been made 100! And crediting Retained Earnings for Printing Plus and accounts receivable 30,000 prepaid Insurance 7,500 Office as of December.! To explain to her the closing entry months ) ( 1,173 ) the except. Cause the debit column of the following account as temporary or permanent: revenue closes the owner equity.
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