Multiple Choice
Which of the following is NOT true of accounting principles?
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1. Introduction to Accounting
Types of Accounting
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Which of the following accounts is NOT a permanent account?
A
Accounts Payable
B
Equipment
C
Retained Earnings
D
Service Revenue
Verified step by step guidance1
Understand the concept of permanent accounts: Permanent accounts are those that carry their balances forward into the next accounting period. These accounts are part of the balance sheet and include assets, liabilities, and equity accounts.
Identify the accounts listed in the problem: Accounts Payable (liability), Equipment (asset), Retained Earnings (equity), and Service Revenue (revenue).
Recall that revenue accounts are temporary accounts: Temporary accounts, such as revenue, expenses, and dividends, are closed at the end of the accounting period to Retained Earnings. They do not carry their balances forward.
Compare the nature of each account: Accounts Payable, Equipment, and Retained Earnings are permanent accounts because they appear on the balance sheet and their balances are carried forward. Service Revenue is a temporary account because it is closed at the end of the period.
Conclude that Service Revenue is NOT a permanent account, as it is closed to Retained Earnings during the closing process.
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