Multiple Choice
Which of the following is typically included in a closing entry at the end of an accounting period?
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3. Accrual Accounting Concepts
Closing Entries
Multiple Choice
Which of the following accounts is included in a closing entry at the end of an accounting period?
A
Cash
B
Accounts Receivable
C
Service Revenue
D
Equipment
Verified step by step guidance1
Understand the concept of closing entries: Closing entries are used to transfer the balances of temporary accounts (such as revenues, expenses, and dividends) to permanent accounts (like Retained Earnings) at the end of an accounting period.
Identify temporary accounts: Temporary accounts include Service Revenue, Expenses, and Dividends. These accounts are closed to prepare for the next accounting period. Permanent accounts like Cash, Accounts Receivable, and Equipment are not closed.
Focus on Service Revenue: Service Revenue is a temporary account that records income earned during the accounting period. At the end of the period, its balance is transferred to Retained Earnings through a closing entry.
Exclude permanent accounts: Cash, Accounts Receivable, and Equipment are permanent accounts. Their balances are carried forward to the next accounting period and are not included in closing entries.
Conclude that Service Revenue is included in a closing entry because it is a temporary account that needs to be closed to Retained Earnings at the end of the accounting period.
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