It seems like the answer options for the multiple-choice question are missing from your query. Temporary accounts (revenue, expenses, and dividends/drawing) are closed at the end of the year to reset their balances for the next period, regardless of whether a perpetual or periodic inventory system is used. Permanent accounts (assets, liabilities, and equity) are not closed.
Therefore, the cost of goods sold account is the only temporary account that is closed at the end of the period.
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.
Identify temporary accounts: Temporary accounts include revenue accounts, expense accounts, and dividend accounts. These accounts are closed because they relate to a specific accounting period and need to start fresh in the next period.
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.
Temporary accounts include revenue, expenses, and dividends. These accounts must be closed at the end of the accounting 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.
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.
Also known as "closing the books", year-end closing is the process of reviewing, reconciling, and verifying that all financial transactions and aspects of the company ledgers from the past financial year add up. This involves calculating the business expenses, income, revenue, assets, investments, equity, and more.
Temporary accounts (such as revenues, expenses, and income summary) are closed at the end of the accounting period to reset their balances to zero for the next period.
A temporary account is an account that is closed at the end of every accounting period and starts a new period with a zero balance. The accounts are closed to prevent their balances from being mixed with the balances of the next accounting period.
Year-end or annual accounts or financial statements are financial documents a business prepares at the end of its financial year. These accounts summarise the company's financial performance, position, and cash flows, providing stakeholders with a snapshot of its financial health.
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 — or “nominal” — accounts are short-term accounts for tracking financial activity during a certain time frame. Businesses close temporary accounts and transfer the remaining balances at the end of predetermined fiscal periods.
Ending inventory, or closing inventory, is the total value of goods you have available for sale at the end of an accounting period, like the end of your fiscal year. It's an inventory accounting method that helps retailers determine net income, obtain financing, and run accurate stock checks.
Recognize permanent accounts: Permanent accounts, such as Retained Earnings, are not closed at the end of the accounting period. Their balances carry forward to the next period.
These are some of the tasks you may need to do:
A year-end accounting checklist typically includes steps such as compiling financial statements, reconciling accounts, reviewing AR and AP, verifying payroll records, completing inventory counts, adjusting entries, preparing tax documents, and backing up financial data.
Closing entries
The goal is to zero out your Income and Expense accounts, then add your fiscal year's net income to Retained Earnings. Closing entries are made after you record all adjusting entries. Once the books are closed, you aren't supposed to enter any entry for that fiscal year.
Accounts are closed at year-end to transfer the balances of temporary accounts, such as revenues, expenses, and dividends, to retained earnings or the owner's capital account. This process resets the temporary accounts to zero, allowing the new accounting period to begin with a clean slate.
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.
Year-End Accounting Close Checklist
Permanent Accounts: This type of account is not closed at the end of the financial period; instead, it is carried forward to the next financial year and usually appears in the statement of financial position.
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.
Conclude: The account that is NOT closed at the end of the accounting period is Retained Earnings, as it is a permanent account.