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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is typically included in a closing entry at the end of an accounting period?

Posting depreciation expense to the Equipment account

Adjusting prepaid expenses to reflect expired amounts

Recording the purchase of inventory on account

Transferring the balance of the Revenue account to Income Summary

Previous problemNext problem

Verified step by step guidance

Understand the purpose of closing entries: Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (e.g., revenues, expenses, and dividends) to permanent accounts (e.g., retained earnings or income summary). This process resets the temporary accounts to zero for the next accounting period.

Identify the temporary accounts involved: Temporary accounts include Revenue, Expense, and Dividend accounts. These accounts are closed to ensure they do not carry over into the next accounting period.

Focus on the Revenue account: The Revenue account is a temporary account, and its balance needs to be transferred to the Income Summary account as part of the closing process. This step consolidates the revenue earned during the period into the Income Summary account.

Exclude other options: Posting depreciation expense to the Equipment account is an adjusting entry, not a closing entry. Adjusting prepaid expenses to reflect expired amounts is also an adjusting entry. Recording the purchase of inventory on account is a regular transaction, not part of the closing process.

Conclude the closing entry process: After transferring the Revenue account balance to the Income Summary account, the Income Summary account will later be used to transfer the net income (or loss) to Retained Earnings, completing the closing process.