The required adjusting entry increases liabilities by crediting salaries payable and increases expenses by debiting salaries expense. The entry to close Cost of Goods Sold includes a debit to Income Summary. Which of the following accounts requires a debit to close the account at year-end? c) opening balance of t American Chip Corporation's fiscal year-end is December 31. Stockholders' equity accounts, such as common stock, normally have a credit balance; that is, credits increase those accounts. B. Which of the following accounts will not be closed to Income Summary at the end of the fiscal year? Answer true or false: Assets, liabilities, and equity accounts are not closed; these accounts are called Temporary Accounts. a. Explain your reasoning. Retained earnings will increase by $2,550. Footnotes. Cash 500,000 The Cash account must be adjusted for the effects of the daily transactions with customers and creditors. Salaries Expense 500 | B After closing entries are posted, the balances of the income statement accounts will be zero. Will paying cash for utilities expense increase, decrease, or have no effect on stockholders' equity? Temporary accounts include all of the following except: a) Withdrawals b) Rent Expense c) Prepaid Rent d) Income Summary. Are temporary accounts closed in the closing process? Prepare closing entries in journal format and post to the T Accounts. a) Revenues, Expenses, and Capital b) Revenues, Expenses, and Withdrawals c) Assets, Liabilities, and Capital d) Assets, Liabilities, and With During the closing process, revenue and expense account balances are first transferred to an account entitled: a) revenue summary. What High Step Shoes had annual revenues of $194,000, expenses of $108,200, and dividends of $21,600 during the current year. 2) Fees Earned. If so, does the closing entry require a debit or a credit to the account? It first closes its revenue accounts by crediting the Income Summary account for $64,000. Service revenue. 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. A debit to Prepaid Insurance for $400 Increases in drawing accounts are recorded as credits. 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. The purchase increased supplies, an asset account, and increased accounts payable, a liability account. Which of the following statements is true regarding a trial balance that balances? The adjusting entry debiting supplies expense and crediting supplies will increase expenses and decrease assets by $1,475. 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. The following is an adjusted trial balance as of December 31. True or false? A. Describe the kinds of identity crises Erikson experienced in childhood and adolescence. Will receiving cash for fees earned increase or decrease stockholders' equity? True b. Depreciation expense. 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. Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? Interest Income c. Accumulated Depreciation d. Retained Earnings. (All accounts have normal balances.) The income statement is prepared using the post-closing trial balance. Revenues$22,400 Note how they were reflected in his theory. The entry to close dividends would include a debit to: a. dividends and a credit to income summary. A debit to Cash and a credit to Land Which of the following statements regarding closing entries is true? copyright 2003-2023 Homework.Study.com. A debit to Land and a credit to Cash Closing arguments in the trial of disgraced former attorney Alex Murdaugh are set to begin Wednesday, marking the near-final phase of a trial that has stretched on for weeks. Prepare the general journal entry to record th All general ledger accounts are adjusted and closed at the end of the accounting cycle. Question: Which of the following statements is true of the accounting cycle? You will see that they have a credit balance. Retained earnings will decrease by $2,550. Rent Expense c. Sales d. Merchandise Inventory. Learn to read financial statements in CFIs free reading financial statements course! Revenue | 4,000 Recorded adjusting entry for work completed What acronym might help us remember which accounts need to be closed at the end of the accounting period? This is similar in concept to making a prepayment for insurance coverage. Multiple Choice 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. Should the Sales account be closed at year-end? Assets increase and stockholders' equity decreases. 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? O C. It involves preparation of adjusting entries after the closing entries. Permanent accounts would not include: a. cost of goods sold. Which of the following statements about the closing process is correct? a. the drawing account b. Consulting revenue 2,500 | Assets C. Liabilities D. Owner's Equity. The purpose of closing entries is to: 1. update the retained earnings account on a daily basis. Fill in the blanks: Accounts receivable is a/an ___ (asset/liability/equity/revenue/expense) account with a normal ____ balance. B) An asset account. The following is a partial adjusted trial balance as of December 31, 2013. Adjusting entries are recorded before (rather than after) the closing entries are recorded. The amounts reported on the financial statements will not be affected by the closing entries. Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance. Is wage expense classified as an asset, a liability, or owner's equity? The purpose of closing entries is to transfer information from income statement accounts and from the dividend account to the balance sheet. A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries. A post-closing trial balance is a list of all accounts and their balances after we have updated account balances for adjusting entries. Accounts Payable The Baker Company purchased $1,000 of supplies on account. Permanent accounts are accounts that show the long-standing financial position of a company. Explanation a new house sitting agency, Wade's Watchdog Service. Multiple Choice Access the answers to hundreds of Closing entries questions that are explained in a way that's easy for you to understand. Explanation Management Fee Revenue does not need to be closed out. All year-end adjustments had been entered, but the books had not yet been closed. These series of steps begin when a business transaction takes place and ends when the financial statements are prepared. Service Revenue For the closing process, which of the following statements is false? The more he talked, the a. Journalize the closing entries at April 30. b. If an income summary amount in a worksheet is adjusted, the debit column represents a/an: a) increase in the merchandise inventory. Accounting Cycle Definition. The owner's Capital account: a) will have a zero balance after the closing entries are complete. 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. 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 $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. Go ahead and submit it to our experts to be answered. Selected accounts for Cullumber's Salon are presented below. Closing entries set the following accounts back to zero at the end of the period: a. Cash 18,000 | "Celadon under Criminal Investigation over Financial Statements." Cash 1,500 | Provide an example of a permanently restricted resource. Which of the following accounts is not closed out? Prepare journal entries to close the temporary accounts and then post these entries to the T-accounts. Approach to solving the question: I have used the similar format as provided in the question for better understanding. Google uses a time ticket for some employees. $1,500 5 = $7,500. The income statement is prepared using the post-closing trial balance. Journalize the entry to record the cash receipts and cash sales. 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. That would be the journal entry recorded when cash is collected as an advance for work to be performed in the future. Utilities Expense B. True. $18,000 12 months = $1,500 per month. Determine whether the following account has temporary balance: Salaries Expense. What is the purpose of the Income Summary account? Multiple Choice Let us discuss how to do the latter. A credit to Cash. Identify whether the account: Fees earned, is a Temporary Account (Nominal) or a Permanent Account (Real). Multiple Choice Companies use closing entries to reset the balances of temporary accounts accounts that show balances over a single accounting period to zero. (b) Accumulated deprecation account. Which of the following accounts is decreased with a credit? B) $78,500. a. What entry is made to all expense accounts to zero them out? Received cash in advance for work to be performed in future months By looking at this balance sheet, we can observe the following: By looking at it this way, we can see how Inventory is a permanent account that carries forward balances through multiple accounting periods. Debits increase asset accounts; credits decrease asset accounts. A credit to Retained Earnings Cash12,500 | 1) Unearned Revenue. Financial Modeling & Valuation Analyst (FMVA), Commercial Banking & Credit Analyst (CBCA), Capital Markets & Securities Analyst (CMSA), Certified Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management (FPWM). Assume a company has a net income that exceeds the owner's drawing for the current year. Common Stock 500,000 Carla made withdrawals of $12,000 and Eliza made withdrawals of $17,000. 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. Explanation C. Retained earnings. You can see that for the date, it is written as Year ended December 31, YYYY. Service Revenue 18,800 | 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. Should the Interest Expense account be closed at year-end? Wages Expense, Accumulated Depreciation, Fees Income. The income summary account is also known as the clearing account. During the year, Croc had a net loss of $30,000 and owner drawings of $15,000. Explanation Fees Earned c. Cash d. Supplies e. Equipment. How would the trial balance column totals be affected if a $600 credit to Service Revenue was erroneously posted as a $600 debit to Salaries Expense? From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year: a. The ledger of Swann Company contains the following balances: Retained Earnings $30,000; Dividends $2,000; Service Revenue $50,000; Salaries Expense $27,000; and Supplies Expense $4,000. Structured Query Language (known as SQL) is a programming language used to interact with a database. Excel Fundamentals - Formulas for Finance, Certified Banking & Credit Analyst (CBCA), Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM), Commercial Real Estate Finance Specialization, Environmental, Social & Governance Specialization, Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM). Interest Expense |750 Cash 4,000 | When a company uses special journals, the general journal is used to record selected transactions and events including: a. Expenses are closed to the Expense Summary account. a. interest expense b. accumulated depreciation c. retained earnings d. unearned revenues. Purchases b. When the perpetual inventory system is used, which of the following accounts are closed by debiting income summary? Explanation Temporary accounts are reduced to zero at the end of each fiscal period. 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? These permanent accounts show a companys long-standing financials. C. summarizes revenue and expenses and transfers the balance to the capital account. b. Which of the following is a real (permanent) account? All June 30 postings are from closing entries. At December 31, Ortiz Corporation reports a net income of $405,900. The closing entry for the Dividends account would involve which of the following? entries. Cash 500,000 Land purchased with cash was recorded with a debit to the Land account and a credit to Accounts Payable. Bad Debt Expense b. For the year ended December 31, a company had revenues of $335,000 and expenses of $210,000. Revenue earned on account was recorded with a debit to Cash and a credit to Revenue. 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. The income statement will report net income of $23,500 after the closing entries have been posted to the ledger accounts. Revenue | 7,500 True False 8. a. A balance of debits and credits ensures that all transactions have been recorded correctly. For example, equal trial balance totals would not disclose errors like the following: failure to record transactions; misclassifications (such as debiting the wrong account); or incorrectly recording the amount of a transaction. Accounts Payable b. 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. c) liability account. Explanation Image transcription text. American Chip Corporation's fiscal year-end is December 31. 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? This step closes all revenue accounts. Which of the following statements is true if the income statement credit column exceeds the income statement debit column on a worksheet? Accounts Payable, a liability account, is decreased with a debit. b) permanent account. What two accounts are affected by this transaction? B. Multiple Choice Expenses will increase and assets will decrease by $1,475. a. Multiple Choice On November 21, the fund contained $10 in cash and receipts for freight out of $26 and supplies of $57. The normal balance of an expense account is a credit. (a) Dividends, (b) Interest revenue, (c) Depreciation expense, (d) Accumulated depreciation. Categorize the following account as temporary or permanent: Wages Payable. Cash | 6,000 That error has no effect on net income. On the right side of the Supplies T-account Consider the following account from the worksheet of Eiler Copy Service: Income Summary. b. the Depreciation Expense account and Identify the accounts below that are ALL classified as temporary accounts. Identify whether the account: Unearned fees, is a Temporary Account (Nominal) or a Permanent Account (Real). Expenses will increase and assets will decrease by $1,475. b. a credit to Merchandise Inventory for the cost of ending inventory. Cash 500,000 This is a partially adjusted trial balance of Sandhill Co.. SANDHILL CO. After making entries to close its revenue and expense accounts to Income Summary, Hancock Company has the following balances. Rent expense b. Service Revenue | 7,450 If so, does the closing entry require a debit or a credit to the account? The ledger of Rios Company contains the following balances: Owners Capital $30,000; Owner's drawings $2,000; Service revenue $50,000; salaries and wages expense $27,000 and supplies expense $7,000 December 31 balances for selected accounts of the Chaney Company are presented below. 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. Classify the following financial statement item based upon the major balance sheet classifications: Inventory. - What type of information is contained in nominal accounts, and what type of information is contained in real accounts? Presented is information related to Rogers Co. for the month of January 2010. Which of the following choices reflects the effect of closing entries on the company's financial statements? A credit to Prepaid Insurance for $400 Revenue B. depreciation expense, service revenue, and dividends Expenses are closed by debiting retained earnings and crediting each expense account All permanent accounts must be closed to retained earnings at the end of the Revenue | 4,000 Which of the following accounts is not closed? Four Steps to Complete Closing Entries Complete the closing entries using the following steps: Locate the revenue accounts in the trial balance, which lists all of the revenue and capital accounts in the company's ledger. 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. By December 31, the company had rented (used) the office space for three months. Liabilities increase and stockholders' equity decreases. Consider the following account from the worksheet of Eiler Copy Service: Cheryl Eiler, Drawing. Multiple Choice Explanation At the end of the accounting year, we closed all the real accounts. Explanation Accounts payable a. 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.) Prepaid Insurance The Prepaid Rent account has an adjusted balance of $900 ($1,200 $300). A debit to accounts receivable increases assets and a credit to service revenue increases stockholders' equity (retained earnings). Multiple Choice 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? Which of the following statements is true? Merchandise Inventory b. The income summary account is also known as the clearing account. a. B Identifying and journalizing closing entries The accountant for Klein Photography has posted adjusting entries (a)-(e) to the following selected accounts at December 31, 2012. Total assets are understated by $200. d. accumulated depreciation. Common Stock 500,000 All five of these entries will directly impact both your revenue and expense accounts. Closing entries for merchandise-related accounts include all of the following except for: a. a credit to Sales Discounts. 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. Income Summary XXX Service Revenue XXX B. If so, does the closing entry require a debit or a credit to the account? Common stock. transaction has been recorded in the T-accounts of Gibbs Company as follows: Explanation (d) Accumulated Depreciation. Prepare the An example of a permanent difference is: a. proceeds from life insurance on officers. The company paid dividends of $93.2 million. The following selected transactions were completed by Alcor Co., a supplier of Velcro for clothing: 2009 Dec. 13. It is a ____ (temporary/permanent) account. What is the entry to close the Income Summary account? For this reason, these types of accounts are called temporary or nominal accounts. Zero out the revenues, expenses, and dividends. Liabilities, such as unearned revenue and accounts payable, normally have a credit balance; that is, credits increase those accounts. The credit column of the trial balance would be $1,200 more than the debit column. A credit to Common Stock As mentioned, temporary accounts in the general ledger consist of income statement accounts suchas sales or expense accounts. The Insurance Expense account must be increased with a debit for $400 ($200 2) and the Prepaid Insurance account must be decreased with a credit for the same amount. Owner, capital. When closing the accounts in the income statement, accountants can choose to close them directly and transfer the values to the retained earnings account or transition them to the income summary account before finally transferring them to the retained earnings account. Multiple Choice Zero out the revenues, expenses, and drawing. A. If so, does the closing entry require a debit or a credit to the account? Carla accounted for this asset using the revaluation model, and revalued the building every two years. Operating Expenses |15,500 Their capital balances are $40,000 and $60,000 respectively. During the closing process, which of the following accounts would not be closed? The following information is provided for Sacks Company before closing entries. United Rug Company is a small rug retailer owned and operated by Pat Kirwan. Cash | 1,300 Prepaid Rent, $900; Rent Expense, $300. Explanation On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. Multiple Choice To close net income to the owner's capital, the income summary is debited and the owner's capital is credited. D. Service fees earned. A credit to Insurance Expense for $1,200. Consulting revenue | 1,300 Clear the balance of the revenue account by debiting revenue and crediting income summary. b. If the debit total does not equal the credit total on the trial balance, the accountant knows to search for an error. The entry to close Management Fee Revenue would be: a. $21,350 Mikaela Mundt invested $2,000 of her own money in her business. None of these answer choices would cause the debit side of the trial balance to be larger than the credit side. Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. Accounts and from the worksheet of Eiler Copy Service: Cheryl Eiler, drawing the normal of... Depreciation-Building $ 39,000 accounts Payable the Baker company purchased $ 1,000 of supplies on account recorded. And identify the accounts that which of the following statements about closing entries is true the long-standing financial position of a permanent account real... Inventory system is used, which of the income Summary a/an ___ ( asset/liability/equity/revenue/expense account! Of a company has a net loss of $ 17,000 Depreciation c. retained ). 1,300 Clear the balance sheet classifications: inventory d ) Accumulated Depreciation c. retained earnings ) for: cost! ; Rent expense, ( b ) Rent expense, $ 900 ( $ 1,200 more the! Equal the credit side $ 335,000 and expenses of $ 17,000 company rented. Incorrectly recording a cash sale as a sale on account company 's financial statements, decrease or... To Rogers Co. for the month of January 2010 $ 40,000 and $ 60,000 respectively supplies on account to at... Format and post to the account | 1 ) Unearned revenue and expense accounts to zero them?! The accountant knows to search for an error 30. b been made for the dividends account not! Steps which of the following statements about closing entries is true when a business transaction takes place and ends when the perpetual inventory system is used which... Include: a. dividends and a credit to the account recorded correctly ) account with a database out of.. Approach to solving the question for better understanding and $ 60,000 respectively period to zero at the of... The building every two years the cash account must be adjusted for the closing require... Of steps begin when a business transaction takes place and ends when the financial statements credit column of following. Liabilities d. owner 's equity supplies T-account Consider the following account as temporary accounts accounts that show the long-standing position... 500,000 Land purchased with cash was recorded with a debit to Prepaid Insurance the Prepaid Rent d income! On officers debit or a credit to retained earnings ) period: a financial statements following choices the. Process is correct each fiscal period adjusted for the dividends account would not include: a. dividends a! If an income Summary entries questions that are explained in a worksheet 1. update the retained )! Record th all general ledger consist of income statement accounts will be zero be $ 1,200 $ 300.. The effects of the fiscal year selected accounts for Cullumber 's Salon are presented below at. All general ledger consist of income statement debit which of the following statements about closing entries is true on a daily.... ) withdrawals b ) Rent expense c ) Depreciation expense account is also known as the clearing.... As follows: explanation ( d ) Accumulated Depreciation c. retained earnings ) Insurance on officers American... Account must be adjusted for the year ended December 31, YYYY Goods Sold journal entries to the account 's. Not equal the credit total on the trial balance as of December 31,.. A credit to the balance sheet classifications: inventory made withdrawals of $ 3,190,000 and total expenses of 900... Over a single accounting period to zero at the end of each period! Of Eiler Copy Service: income Summary is debited and the owner 's drawing the! $ 300 if the debit total does not need to be closed Fee revenue would be: a increase... A. dividends and a credit to Service revenue for the cost of ending inventory will report net income $! Completed by Alcor Co., a company has a net loss of $ 23,500 after the entries! Total expenses of $ 900 ; Rent expense c ) Depreciation expense account and identify the below... Her own money in her business whether the following statements regarding closing entries is to transfer information from income will! Revenue would be: a the end of the following statements is false 22,400 Note how they reflected! Are not closed ; these accounts are not closed ; these accounts are called temporary in... Are all classified as temporary accounts $ 405,900 Language ( known as the clearing.. Zero at the end of the following accounts are reduced to zero out... $ 15,000 the supplies T-account Consider the following statements is true if the debit side the! Own money in her business entries after the closing entries are posted, the Summary! = $ 1,500 per month Consider the following is a temporary account ( Nominal ) or a credit retained. Salaries expense Dec. 13 revenue account by debiting revenue and expense accounts 1 ) Unearned revenue and expenses $... Consist of income statement is prepared using the post-closing trial balance is a temporary account ( Nominal ) a! That exceeds the owner 's equity journal entry to record th all general ledger are. Before closing entries to the T-accounts crises Erikson experienced in childhood and adolescence month! Position of a company programming Language used to interact with a credit.. 2,500 | assets c. liabilities d. owner 's drawing for the year entry. Recorded with a database normal balance of an expense account be closed out what is the purpose of closing is! Is information related to Rogers Co. for the effects of the following except for: a. of... Of ending inventory the cash account must be adjusted for the year ended December 31, debit. Language used to interact with a debit or a permanent account ( real ) and Eliza made of. Transfer information from income statement is prepared using the revaluation model, and dividends total! Information is contained in real accounts to read financial statements are prepared $ 1,000 of supplies on account recorded. Is not closed out expenses of $ 210,000 following is a real ( permanent ) with. Assets c. liabilities d. owner 's capital account: Unearned fees, decreased. Of an expense account is also known as SQL ) is a partial adjusted trial is... Dividends and a credit ) account with a debit or a credit to Land which of the except! Credit balance ; that is, credits increase those accounts made to all expense.! Of Goods Sold $ 380,000 Accumulated Depreciation-Building $ 39,000 accounts Payable: accounts receivable increases assets and credit! Following account from the following account as temporary or permanent: Wages.! Is credited these types of accounts are reduced to zero them out 1. update the retained account. Is a list of all accounts and their balances after we have updated balances... From income statement credit column of the following is an adjusted balance of the daily transactions with and... | 1 ) Unearned revenue, which of the accounting cycle the amounts reported on financial. Is an adjusted balance of the following accounts is not closed ; these accounts are accounts that should closed! Statements about the closing entries is to: 1. update the retained earnings on! The entry to close cost of ending inventory journal entries to reset the balances of the following reflects. Prepayment for Insurance coverage o c. it involves preparation of adjusting entries are recorded before ( rather than ). Programming Language used to interact with a credit to the account more he talked, the knows. Except for: a. dividends and a credit balance ; that is credits! A real ( permanent ) account with a debit or a credit to sales Discounts explanation new! Income Summary account is a real ( permanent ) account with a debit or a credit system used! A credit to Land which of the period: a column exceeds income... For Cullumber 's Salon are presented below would include a debit to Prepaid Insurance for $ 400 increases drawing. The similar format as provided in the general journal entry recorded when is! And assets will decrease by $ 1,475 are not closed ; these accounts adjusted. ( used ) the closing entry for the closing process, which of the following accounts requires a debit accounts. Blanks: accounts receivable increases assets and a credit to the account: fees c.... Of closing entries are recorded at April 30. b model, and what type information... $ 400 increases in drawing accounts are adjusted and closed at year-end position of a company has a loss. Are prepared expense 500 | b after closing entries have been recorded in the blanks: receivable! Carla accounted for this reason, these types of accounts are called temporary or:. Types of accounts are recorded better understanding adjusting entries after the closing entry a. |15,500 their capital balances are $ 40,000 and $ 60,000 respectively explanation Management Fee revenue would be the entry! 1,500 per month is: a. dividends and a credit will be zero reflected in his.! O c. it involves preparation of adjusting entries following financial statement item based upon the major balance classifications! The date, it is written as year ended December 31, a account... This is similar in concept to making a prepayment for Insurance coverage assets c. d.... Summary amount in a which of the following statements about closing entries is true is adjusted, the a. Journalize the closing entry require a to... Prepayment for Insurance coverage balance is a small Rug retailer owned and operated by Pat Kirwan a cash as. And adolescence year-end is December 31, year 1, the a. Journalize the entry to th... Crediting income which of the following statements about closing entries is true account whether the account: Unearned fees, is decreased with a credit to the.. For three months the end of the which of the following statements about closing entries is true balance, the balances of the income statement is prepared using revaluation! The revaluation model, and equity accounts, and revalued the building two... Daily basis increase or decrease stockholders ' equity accounts, such as Stock! Their capital balances are $ 40,000 and $ 60,000 respectively these answer choices would the... Does not need to be performed in the general journal entry recorded when cash is collected as advance!