Multiple Choice
On which two financial statements does the Retained Earnings account appear?
11
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12. Stockholders' Equity
Retained Earnings
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Which of the following accounts is never closed at the end of an accounting period?
A
Service Revenue
B
Interest Expense
C
Retained Earnings
D
Dividends
Verified step by step guidance1
Understand the concept of closing entries: At the end of an accounting period, temporary accounts (such as revenues, expenses, and dividends) are closed to transfer their balances to permanent accounts like Retained Earnings.
Identify temporary accounts: Service Revenue and Interest Expense are temporary accounts because they are used to record transactions for a specific period and are closed at the end of the period.
Recognize the role of Dividends: Dividends are also a temporary account because they represent distributions to shareholders during the period and are closed to Retained Earnings.
Understand permanent accounts: Retained Earnings is a permanent account that accumulates the net income or loss and dividends over time. It is not closed at the end of the accounting period because it carries its balance forward to the next period.
Conclude that Retained Earnings is the account that is never closed at the end of an accounting period, as it is a permanent account.
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