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 accounting process ensures that all revenue and expense accounts are reset to zero at the end of the accounting period, typically on the last day of the calendar year, so that yearly earnings are finalized?

Reversing entries

Adjusting entries

Closing entries

Accrual entries

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Verified step by step guidance

Understand the purpose of closing entries: Closing entries are used to reset all revenue, expense, and dividend accounts to zero at the end of the accounting period. This ensures that the accounts are ready to record transactions for the next period and that yearly earnings are finalized.

Identify the accounts involved: Closing entries typically involve temporary accounts such as revenue accounts, expense accounts, and dividend accounts. These accounts are closed to the retained earnings account, which is a permanent account.

Prepare the closing entries: For each revenue account, debit the account to bring its balance to zero and credit the retained earnings account. For each expense account, credit the account to bring its balance to zero and debit the retained earnings account. For dividends, credit the dividends account and debit the retained earnings account.

Post the closing entries to the ledger: After preparing the journal entries, post them to the general ledger to update the balances of the accounts involved.

Verify the accounts are reset: After posting the closing entries, check that all temporary accounts (revenue, expense, and dividends) have a zero balance, and the retained earnings account reflects the net income or loss for the period.