Multiple Choice
A supplier is an external stakeholder that:
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1. Introduction to Accounting
Types of Accounting
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Which of the following is NOT considered a permanent account?
A
Service Revenue
B
Accounts Payable
C
Inventory
D
Retained Earnings
Verified step by step guidance1
Understand the concept of permanent accounts: Permanent accounts are balance sheet accounts that carry their balances forward into the next accounting period. These include assets, liabilities, and equity accounts.
Identify the nature of each account listed: Service Revenue is an income statement account, while Accounts Payable, Inventory, and Retained Earnings are balance sheet accounts.
Recognize that Service Revenue is a temporary account: Temporary accounts are closed at the end of the accounting period and their balances are transferred to Retained Earnings. Service Revenue falls under this category.
Compare Service Revenue with the other accounts: Accounts Payable is a liability, Inventory is an asset, and Retained Earnings is an equity account. All of these are permanent accounts because they appear on the balance sheet and are not closed at the end of the period.
Conclude that Service Revenue is NOT a permanent account because it is closed at the end of the accounting period, unlike the other accounts listed.
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