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

Which of the following types of accounts are included in closing journal entries?

Notes payable accounts

Revenue and expense accounts

Capital stock accounts

Asset and liability accounts

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Verified step by step guidance

Understand the purpose of closing journal entries: Closing entries are used to transfer the balances of temporary accounts (such as revenue, expenses, and dividends) to permanent accounts (such as retained earnings). This process resets the temporary accounts to zero for the next accounting period.

Identify the types of accounts involved: Temporary accounts include revenue accounts, expense accounts, and dividend accounts. These are closed at the end of the accounting period. Permanent accounts, such as asset, liability, and capital stock accounts, are not closed because their balances carry forward to the next period.

Focus on revenue and expense accounts: Revenue accounts are credited during the accounting period, and expense accounts are debited. At the end of the period, their balances are transferred to the retained earnings account through closing entries.

Exclude asset, liability, and capital stock accounts: These accounts are permanent and are not included in closing journal entries. Their balances remain unchanged and are carried forward to the next accounting period.

Prepare the closing journal entries: To close revenue accounts, debit each revenue account and credit retained earnings. To close expense accounts, credit each expense account and debit retained earnings. This ensures that the temporary accounts are reset to zero and their balances are reflected in retained earnings.