Multiple Choice
Which of the following statements is true regarding the post-closing trial balance?
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3. Accrual Accounting Concepts
Post-Closing Trial Balance
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Which of the following accounts may appear on a post-closing trial balance?
A
Retained Earnings
B
Service Revenue
C
Dividends
D
Salaries Expense
Verified step by step guidance1
Understand the purpose of a post-closing trial balance: It is prepared after closing entries are made to ensure that total debits equal total credits and to verify that only permanent accounts (balance sheet accounts) remain open.
Identify the types of accounts: Permanent accounts include assets, liabilities, and equity accounts, while temporary accounts include revenues, expenses, and dividends. Temporary accounts are closed at the end of the accounting period.
Analyze each account provided: Retained Earnings is a permanent equity account and will appear on the post-closing trial balance. Service Revenue, Dividends, and Salaries Expense are temporary accounts and are closed to Retained Earnings during the closing process.
Explain the closing process: Temporary accounts are closed by transferring their balances to Retained Earnings. For example, revenue accounts are credited to Retained Earnings, and expense accounts are debited to Retained Earnings.
Conclude which accounts appear: Only Retained Earnings will appear on the post-closing trial balance because it is a permanent account, while Service Revenue, Dividends, and Salaries Expense are temporary accounts that are closed.
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