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 is a possible closing entry at the end of an accounting period?

Debit Cash; Credit Service Revenue

Debit Equipment; Credit Accumulated Depreciation

Debit Accounts Payable; Credit Cash

Debit Service Revenue; Credit Income Summary

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Verified step by step guidance

Understand the purpose of closing entries: Closing entries are used to transfer the balances of temporary accounts (e.g., revenues, expenses, and dividends) to permanent accounts (e.g., retained earnings or income summary) at the end of an accounting period.

Identify the temporary account involved: In this case, the temporary account is 'Service Revenue,' which needs to be closed to the 'Income Summary' account.

Determine the normal balance of the temporary account: Service Revenue has a normal credit balance. To close it, you need to debit the Service Revenue account to bring its balance to zero.

Record the corresponding entry in the Income Summary account: Since you are debiting Service Revenue, you must credit the Income Summary account with the same amount to complete the closing entry.

Write the closing entry: The closing entry would be formatted as 'Debit Service Revenue; Credit Income Summary' to transfer the revenue balance to the Income Summary account.