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 of the following accounts will be debited in the closing entry at the end of the year?

Accumulated Depreciation

Retained Earnings

Service Revenue

Cash

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Verified step by step guidance

Understand the concept of closing entries: Closing entries are used to transfer the balances of temporary accounts (such as revenues, expenses, and dividends) to permanent accounts (such as Retained Earnings) at the end of the accounting period.

Identify the nature of the accounts listed: Service Revenue is a temporary account, while Accumulated Depreciation and Cash are permanent accounts. Retained Earnings is also a permanent account.

Determine the treatment of Service Revenue: Since Service Revenue is a temporary account, its balance needs to be closed to Retained Earnings. To close a revenue account, you debit the revenue account and credit Retained Earnings.

Understand why Accumulated Depreciation and Cash are not debited: Accumulated Depreciation is a contra-asset account and is not closed during the closing process. Cash is an asset account and remains open as part of the balance sheet.

Conclude that the correct account to be debited in the closing entry is Service Revenue, as it is a temporary account that needs to be closed to Retained Earnings.