Multiple Choice
Which of the following accounts would be closed by posting a debit to it at the end of the accounting period?
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3. Accrual Accounting Concepts
Closing Entries
Multiple Choice
Which of the following accounts will NOT be closed during the closing process?
A
Dividends
B
Service Revenue
C
Retained Earnings
D
Salaries Expense
Verified step by step guidance1
Step 1: Understand the closing process in accounting. The closing process involves transferring the balances of temporary accounts (such as revenues, expenses, and dividends) to permanent accounts (such as Retained Earnings). Temporary accounts are closed to reset their balances to zero for the next accounting period.
Step 2: Identify the temporary accounts listed in the problem. Temporary accounts include Dividends, Service Revenue, and Salaries Expense. These accounts are closed during the closing process.
Step 3: Recognize that Retained Earnings is a permanent account. Permanent accounts are not closed during the closing process because their balances carry forward to the next accounting period.
Step 4: Confirm that Retained Earnings is the correct answer because it is a permanent account and will not be closed during the closing process.
Step 5: Review the purpose of closing entries. Closing entries are made to update the Retained Earnings account with the net income or loss and dividends for the period, but the Retained Earnings account itself remains open and is not reset to zero.
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