It seems like the answer options are missing from your query. However, the account that is closed at the end of the fiscal year by debiting Retained Earnings is the Dividends account.
In accounting, we often refer to the process of closing as closing the books. Only revenue, expense, and dividend accounts are closed—not asset, liability, Common Stock, or Retained Earnings accounts.
Revenue, expense, and dividend accounts affect retained earnings and are closed so they can accumulate new balances in the next period, which is an application of the time period assumption.
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. Therefore, the answer is D.
Dividends are closed into retained earnings by debiting Retained Earnings.
Dividend accounts are closed to retained earnings.
At the end of an accounting period (usually a year or a quarter), nominal accounts are “”closed.”” This means the balances are transferred to a summary account, usually the Profit and Loss account. This resets the nominal accounts to zero, preparing them for the next accounting period.
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.
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.
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.
Temporary Accounts: These accounts reflect the company's revenues and expenses and are closed at the end of each accounting period by transferring their balances to the retained earnings account.
End of Period Retained Earnings
At the end of the period, you can calculate your final Retained Earnings balance for the balance sheet by taking the beginning period, adding any net income or net loss, and subtracting any dividends.
Step-by-Step Guide to Closing Entries
The fiscal year-end close process is required to prepare the general ledger accounts for financial statement presentation and for the start of the next accounting process. The closing process consists of steps to transfer income statement accounts to balance sheet accounts.
Temporary accounts, such as revenue and expenses, are closed at the end of each period, so they start fresh in the next one. In contrast, permanent accounts, such as assets, liabilities, and equity, carry forward their balances from one period to the next.
What are closing entries? Give four examples of closing entries.
Inputting a closing entry resets the temporary account balances to zero. Temporary accounts include revenue, expenses, and dividends. These accounts must be closed at the end of the accounting year.
If needed make any year-end adjusting entries to Retained Earnings. We highly suggest that you review all accounting procedures with your CPA. All Revenue and Expense accounts will need to be closed into Retained Earnings.
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.
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.
Correct Answer: Option a) Cost of Goods Sold.
Conclude: The account that is NOT closed at the end of the accounting period is Retained Earnings, as it is a permanent account.
In accounting, we often refer to the process of closing as closing the books. Only revenue, expense, and dividend accounts are closed—not asset, liability, Common Stock, or Retained Earnings accounts.
Examples of nominal accounts are service revenue, sales revenue, wages expense, utilities expense, supplies expense, and interest expense.