Multiple Choice
Which of the following is NOT a closing entry?
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3. Accrual Accounting Concepts
Closing Entries
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Which of the following accounts is NOT closed at the end of the accounting period?
A
Utilities Expense
B
Owner's Capital
C
Rent Expense
D
Service Revenue
Verified step by step guidance1
Understand the concept of closing entries: Closing entries are made at the end of an accounting period to transfer balances from temporary accounts (revenues, expenses, and withdrawals) to permanent accounts (such as Owner's Capital). Temporary accounts are reset to zero for the next accounting period.
Identify temporary accounts: Temporary accounts include revenue accounts (e.g., Service Revenue), expense accounts (e.g., Utilities Expense and Rent Expense), and withdrawal accounts. These accounts are closed to prepare for the next period.
Recognize permanent accounts: Permanent accounts, such as Owner's Capital, are not closed at the end of the accounting period. Their balances are carried forward to the next period.
Analyze the options provided: Utilities Expense, Rent Expense, and Service Revenue are temporary accounts and are closed at the end of the accounting period. Owner's Capital is a permanent account and is not closed.
Conclude that the correct answer is Owner's Capital, as it is the account that is NOT closed at the end of the accounting period.
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