Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Closing Entries

Financial Accounting

3. Accrual Accounting Concepts

Closing Entries

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Multiple Choice

Which of the following entries properly closes a temporary account at the end of the accounting period?

Debit Service Revenue; Credit Retained Earnings

Debit Income Summary; Credit Cash

Debit Service Revenue; Credit Income Summary

Debit Retained Earnings; Credit Service Revenue

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Verified step by step guidance

Understand the concept of temporary accounts: Temporary accounts include revenue, expense, and dividend accounts. These accounts are closed at the end of the accounting period to transfer their balances to permanent accounts, such as Retained Earnings.

Identify the correct closing process: Revenue accounts are closed by debiting the revenue account and crediting the Income Summary account. This step transfers the revenue balance to the Income Summary account.

Recognize the role of the Income Summary account: The Income Summary account is a temporary account used to summarize revenues and expenses. After transferring revenue and expense balances to this account, it is closed to Retained Earnings.

Analyze the options provided: The correct entry for closing a revenue account is 'Debit Service Revenue; Credit Income Summary,' as this properly transfers the revenue balance to the Income Summary account.

Verify the closing process: After closing all temporary accounts (revenues, expenses, and dividends), the Income Summary account is closed to Retained Earnings, ensuring that the net income or loss is reflected in the permanent equity account.