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

On the closing statement, what is the term for an amount that appears in the party’s favor?

Debit

Deferral

Credit

Accrual

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Verified step by step guidance

Understand the concept of a closing statement: A closing statement is a financial summary that outlines the final amounts owed or received by parties involved in a transaction.

Learn the meaning of 'Credit' in accounting: A credit represents an amount that increases liabilities or equity, or decreases assets. In the context of a closing statement, it refers to an amount in the party's favor.

Compare the given terms: Debit, Deferral, Accrual, and Credit. Debit typically represents an amount that decreases liabilities or equity, or increases assets. Deferral refers to postponing recognition of revenue or expenses. Accrual involves recording revenues or expenses when they are incurred, regardless of cash flow.

Identify why 'Credit' is correct: On a closing statement, an amount in the party's favor is recorded as a credit because it represents a positive balance or benefit to the party.

Apply this understanding to similar scenarios: Whenever you encounter a closing statement, look for credits to identify amounts that are favorable to the party in question.