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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

After a bankruptcy procedure is completed, which of the following is the correct accounting treatment for the balances of temporary accounts during the closing entries process?

Temporary accounts remain open until the next fiscal year.

All temporary accounts are closed to the retained earnings account.

Temporary accounts are carried forward to the next accounting period.

Temporary accounts are closed to the capital stock account.

Previous problemNext problem

Verified step by step guidance

Understand the concept of temporary accounts: Temporary accounts include revenue, expense, and dividend accounts. These accounts are used to record transactions during a specific accounting period and are reset to zero at the end of the period.

Learn the purpose of closing entries: Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts, ensuring that temporary accounts start fresh in the next period.

Identify the correct permanent account for closing: In most cases, temporary accounts are closed to the retained earnings account, which is a part of the equity section of the balance sheet. Retained earnings represent the accumulated profits or losses of the company.

Understand why temporary accounts are not carried forward: Temporary accounts are designed to track activity for a single accounting period. Carrying them forward would conflict with the principle of periodicity in accounting, which requires financial results to be reported for specific periods.

Clarify the incorrect options: Temporary accounts are not closed to the capital stock account, as capital stock represents ownership interest and is not affected by operational results. Additionally, temporary accounts do not remain open or carry forward to the next fiscal year, as this would violate the purpose of closing entries.