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?
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3. Accrual Accounting Concepts
Closing Entries
Multiple Choice
Which of the following accounts would NOT appear in a closing entry?
A
Accounts Payable
B
Retained Earnings
C
Service Revenue
D
Salaries Expense
Verified step by step guidance1
Understand the purpose of closing entries: Closing entries are used to transfer the balances of temporary accounts (e.g., revenues, expenses, and dividends) to permanent accounts (e.g., Retained Earnings) at the end of an accounting period.
Identify temporary accounts: Temporary accounts include revenue accounts (e.g., Service Revenue), expense accounts (e.g., Salaries Expense), and dividend accounts. These accounts are closed to Retained Earnings.
Recognize permanent accounts: Permanent accounts, such as Accounts Payable, are not closed because their balances carry forward to the next accounting period.
Analyze the given options: Service Revenue and Salaries Expense are temporary accounts, so they would appear in closing entries. Retained Earnings is the account to which temporary accounts are closed, so it is part of the closing process.
Conclude which account does NOT appear in a closing entry: Accounts Payable is a permanent account and does not appear in closing entries because its balance is not transferred or closed at the end of the period.
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