Multiple Choice
When does the closing process in accounting typically take place?
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3. Accrual Accounting Concepts
Closing Entries
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is a temporary account?
A
Service Revenue
B
Equipment
C
Accounts Payable
D
Retained Earnings
Verified step by step guidance1
Understand the concept of temporary accounts: Temporary accounts are used to record transactions for a specific accounting period and are closed at the end of the period. These accounts include revenues, expenses, and dividends.
Identify the nature of each account listed: Service Revenue is a revenue account, Equipment is an asset account, Accounts Payable is a liability account, and Retained Earnings is an equity account.
Recognize that temporary accounts are closed to the Retained Earnings account at the end of the accounting period. Permanent accounts, such as assets, liabilities, and equity, are not closed and carry their balances forward to the next period.
Determine which account among the options is temporary: Service Revenue is a temporary account because it is closed at the end of the accounting period to Retained Earnings. The other accounts (Equipment, Accounts Payable, and Retained Earnings) are permanent accounts.
Conclude that the correct answer is Service Revenue, as it fits the definition of a temporary account used to record transactions for a specific period and is closed afterward.
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