The correct option is a. service revenue.
The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains, losses), the sole proprietor's drawing account, the income summary account, and any other account that is used for keeping a tally of the current year amounts.
The accounts that should be closed to Income Summary at the end of the fiscal year are the revenue and expense. The other accounts listed - Prepaid Insurance, Equipment, and Unearned Rent - are permanent accounts and should not be closed to Income Summary.
Answer and Explanation:
At the end of the year, only temporary accounts are closed to the permanent accounts in the balance sheet for the new year balances to flow into them.
Option b, is correct because prepaid insurance is a permanent account or balance sheet account because it represents an asset. It is not closed to retained earnings at the end of the fiscal year.
Based on the explanation above, Retained Earnings is a permanent account and is not closed. Conclude the reasoning: Service Revenue, Dividends, and Salaries Expense are temporary accounts and are closed, while Retained Earnings is a permanent account and remains open, making it the correct answer to the question.
We need to do the closing entries to make them match and zero out the temporary accounts.
Permanent accounts are balance sheet accounts that are not closed at the end of an accounting period. The balances of these accounts are not reset to zero at the end of each accounting period but instead, carry forward continuously to subsequent accounting periods.
Temporary accounts include revenue, expenses, and dividends. These accounts must be closed at the end of the accounting year.
Answer and Explanation: Temporary accounts are the accounts that should be closed at the end of the accounting period. Temporary accounts generally include all income statement accounts and the drawing or withdrawal account.
Accounts Receivable is not closed because this is a balance sheet account which are accumulating or updating.
Explanation of Permanent Accounts:
Since they reflect the ongoing financial position of the company, they are not closed at the end of the period. Their balances are cumulative and adjusted only by transactions, not by closing entries.
A permanent account, on the other hand, possesses the following characteristics: It is not closed at the end of every accounting period and may stay open throughout the life of the company. Such types of accounts include equity, liabilities, and assets accounts and are also referred to as real accounts.
Temporary accounts such as revenues, expenses, and dividends must be closed at the year's end, and the balance reset to zero to start another fiscal year.
The year-end close is critical, marking the final reconciliation of all accounts payable transactions. Your goal is to provide a complete and accurate snapshot of your organization's financial position, which is essential for compliance, reporting, and strategic planning.
The account that would not be closed at the end of each fiscal year is the fund balance. Unlike temporary accounts such as estimated revenues, interfund transfers out, and expenditures, the fund balance remains open. It represents the net resources that carry forward to the next fiscal year.
Temporary accounts are not carried onto the next accounting period. They are measured from period to period only. Temporary accounts include revenues, expenses, and withdrawals. They are closed at the end of every year so as not to be mixed with the income and expenses of the next periods.
The supplies expense is an expense account. Expenses are temporary accounts and must have zero balances at the end of the period. Hence, this account would be closed at the end of the period. Unearned revenue, cash, and accounts receivables are permanent accounts and would not be closed at the end of the period.
Conclude that the correct answer is Owner's Capital, as it is the account that is NOT closed at the end of the accounting period.
Closing process: Temporary accounts are closed at the end of each accounting period by transferring their balances to the Retained Earnings account. This process resets their balances to zero for the new period. In contrast, permanent accounts are not closed but carry their balances forward.
Conclude: The account that is NOT closed at the end of the accounting period is Retained Earnings, as it is a permanent account.
Typically, businesses use many types of accounts to keep track of their financial information and current value. These can include asset, expense, income, liability and equity accounts.
Final accounts are financial statements prepared at the end of an accounting period to determine a business's results and financial position. They typically include the Trading Account, Profit & Loss Account, and Balance Sheet to summarize profitability and the values of assets and liabilities.
At the end of an accounting period, closing entries are made to transfer the balances of temporary accounts—revenues, expenses, and dividends or withdrawals—into permanent accounts. This process resets the temporary accounts to zero and prepares the books for the next period.