Multiple Choice
What is the primary purpose of preparing a post-closing trial balance?
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3. Accrual Accounting Concepts
Post-Closing Trial Balance
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Which of the following accounts is NOT listed in a post-closing trial balance?
A
Accounts Payable
B
Service Revenue
C
Retained Earnings
D
Cash
Verified step by step guidance1
Understand the purpose of a post-closing trial balance: It is prepared after closing entries are made to ensure that total debits equal total credits. Only permanent accounts (assets, liabilities, and equity) are included in this trial balance.
Identify the types of accounts: Permanent accounts include assets (e.g., Cash), liabilities (e.g., Accounts Payable), and equity (e.g., Retained Earnings). Temporary accounts, such as revenues, expenses, and dividends, are closed to Retained Earnings at the end of the accounting period.
Analyze the given accounts: 'Accounts Payable' is a liability account, 'Cash' is an asset account, and 'Retained Earnings' is an equity account. These are all permanent accounts and will appear in the post-closing trial balance.
Consider 'Service Revenue': Revenue is a temporary account. It is closed to Retained Earnings during the closing process and does not appear in the post-closing trial balance.
Conclude that the account NOT listed in a post-closing trial balance is 'Service Revenue' because it is a temporary account that has been closed.
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