Multiple Choice
On the closing statement, what is the term for an amount that appears in the party’s favor?
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3. Accrual Accounting Concepts
Closing Entries
Multiple Choice
Which of the following accounts is NOT closed at the end of the accounting period?
A
Salaries Expense
B
Dividends
C
Retained Earnings
D
Service Revenue
Verified step by step guidance1
Understand the concept of closing entries: At the end of an accounting period, temporary accounts (such as revenues, expenses, and dividends) are closed to transfer their balances to permanent accounts, typically Retained Earnings.
Identify temporary accounts: Temporary accounts include Service Revenue, Salaries Expense, and Dividends. These accounts are closed because their balances are only relevant for the current accounting period.
Recognize permanent accounts: Permanent accounts, such as Retained Earnings, are not closed at the end of the accounting period. Their balances carry forward to the next period.
Analyze the given options: Salaries Expense, Dividends, and Service Revenue are temporary accounts, while Retained Earnings is a permanent account.
Conclude that Retained Earnings is the correct answer because it is a permanent account and is NOT closed at the end of the accounting period.
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