Multiple Choice
To which of the following accounts should the balance in the Income Summary account be closed at the end of the accounting period?
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3. Accrual Accounting Concepts
Closing Entries
Multiple Choice
On a closing statement, ______ goes in the seller’s credit column and the buyer’s debit column.
A
the earnest money deposit
B
the prepaid property taxes
C
the sales price of the property
D
the loan amount assumed by the buyer
Verified step by step guidance1
Understand the context of the problem: A closing statement is a financial document used in real estate transactions to summarize the financial details of the sale, including credits and debits for both the buyer and the seller.
Identify the key terms: 'Seller’s credit column' refers to amounts that the seller is entitled to receive, while 'Buyer’s debit column' refers to amounts the buyer is obligated to pay.
Analyze the options provided: The earnest money deposit is typically credited to the buyer, prepaid property taxes are prorated between the buyer and seller, the sales price of the property is credited to the seller and debited to the buyer, and the loan amount assumed by the buyer is credited to the buyer.
Determine the correct match: The sales price of the property is the amount the seller is entitled to receive (credit) and the buyer is obligated to pay (debit).
Conclude that the sales price of the property is the correct answer, as it aligns with the definitions of seller’s credit and buyer’s debit in a closing statement.
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