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

In preparing closing entries at the end of an accounting period, which of the following accounts is NOT closed to the Income Summary account?

Rent Expense

Salaries Expense

Service Revenue

Retained Earnings

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Verified step by step guidance

Understand the purpose of closing entries: Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (revenues, expenses, and dividends) to permanent accounts (Retained Earnings). This process resets the temporary accounts to zero for the next accounting period.

Identify the temporary accounts: Temporary accounts include revenue accounts (e.g., Service Revenue), expense accounts (e.g., Rent Expense, Salaries Expense), and dividend accounts. These accounts are closed to the Income Summary account during the closing process.

Recognize the permanent accounts: Permanent accounts, such as Retained Earnings, are not closed to the Income Summary account. Instead, the balance of the Income Summary account is transferred to Retained Earnings after all temporary accounts are closed.

Analyze the given options: Rent Expense, Salaries Expense, and Service Revenue are temporary accounts that are closed to the Income Summary account. Retained Earnings is a permanent account and is not closed to the Income Summary account.

Conclude the process: After closing all temporary accounts to the Income Summary account, the final step is to transfer the balance of the Income Summary account to Retained Earnings, ensuring the accounting cycle is complete.