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

A major distinction between temporary and permanent accounts in the closing entries process is:

Permanent accounts are closed at the end of each accounting period, while temporary accounts remain open.

Both temporary and permanent accounts are closed at the end of each accounting period.

Temporary accounts are only used for balance sheet items, while permanent accounts are used for income statement items.

Temporary accounts are closed at the end of each accounting period, while permanent accounts are not closed.

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Verified step by step guidance

Understand the concept of temporary accounts: Temporary accounts are used to record transactions for a specific accounting period. These include revenue, expense, and dividend accounts. At the end of the accounting period, their balances are transferred to permanent accounts (e.g., Retained Earnings) and reset to zero for the next period.

Understand the concept of permanent accounts: Permanent accounts are balance sheet accounts such as assets, liabilities, and equity. These accounts carry their balances forward from one accounting period to the next and are not closed.

Recognize 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. This ensures that temporary accounts start with a zero balance in the next period.

Distinguish between temporary and permanent accounts in the closing process: Temporary accounts are closed (reset to zero) at the end of each accounting period, while permanent accounts remain open and retain their balances.

Apply this understanding to the problem: The correct distinction is that temporary accounts are closed at the end of each accounting period, while permanent accounts are not closed. This ensures the proper segregation of accounting periods and the continuity of permanent account balances.