Nature and purpose of closing entries, Accounting Basics

Closing Entries based accounting question

a)  Describe the nature of Closing Entries.  I.e. what is the purpose of closing entries?                    

b)  For each of the following accounts, indicate whether it is closed at the end of the year:                          

                 a)  Salaries Expense

                 b)  Accounts Receivable

                 c)  Sales Revenues

                 d)  Retained Earnings

                 e)  Cash              

                 f)  Rent Expense

                 g)  Interest income

                 h)  Accounts Payable

                 i)  Depreciation Expense

                 j)  Notes Payable

Answers:                                                                            

                At the end of accounting period, all the temporary accounts are closed. It means at the end of accounting period their balance becomes zero. The temporary accounts are transferred to their permanent accounts. This transfer is done by passing closing entries.                                                             

Temporary accounts include:                                                                     

                1. Revenue, Income and Gain Accounts                                                                

                2. Expense and Loss Accounts                                                                   

                3. Dividend, Drawings or Withdrawal accounts                                                                   

                4. Income Summary Account                   

 

 Whether following accounts are closed or not at the end of period:                                                                        

                 a)  Salaries Expense       Yes                                                        

                 b)  Accounts Receivable               No                                                         

                 c)  Sales Revenues          Yes                                                        

                 d)  Retained Earnings    No                                                         

                 e)  Cash               No                                                         

                 f)  Rent Expense              Yes                                                        

                 g)  Interest income         Yes                                                        

                 h)  Accounts Payable     No                                                         

                 i)  Depreciation Expense              Yes                                                        

                 j)  Notes Payable             No                                                          

 

 

Posted Date: 7/12/2012 2:59:22 AM | Location : United States







Related Discussions:- Nature and purpose of closing entries, Assignment Help, Ask Question on Nature and purpose of closing entries, Get Answer, Expert's Help, Nature and purpose of closing entries Discussions

Write discussion on Nature and purpose of closing entries
Your posts are moderated
Related Questions
Exercise 5-2 - Harwick company. 1) On April 5, purchased merchandise from Botham Company for $23,000, terms 2/10, net/30, FOB shipping point. 2)On April 6, paid freight costs of $

Obtain the relevant authoritative literature on accounting for accounts receivable using the FASB's Codification Research System at the FASB website. What is the specific citation

As discussing the scope of accounting you should have observed here the accounting involves a sequence of activities connected with each other, starting along with the collecting,

Pro forma Financial Statements In accounting, a financial statement in which the amounts begin are fully or partially estimates; from the Latin for "as a matter of form."

A baker makes 500 cream-filled eclairs at a cost of $0.72 each. He estimates that 10% of the eclairs will be sold the following day at a reduced price of $0.80 each. Find the mar

Q. What is Asset cost and Estimated residual value? Asset cost: The asset cost is the sum that a company paid to purchase the depreciable asset. Estimated residual value:

Distinctions between management and financial accounting We can observe that management accounting is less constrained than financial accounting. It may draw from a range of s

Determine about the Sales returns and allowances Allowance results when a buyer decides to keep defective or damaged goods though at a reduction from the original price.

#quthe books of deven verma could not be tallied.the accountant transferred the difference of Rs.1270 in the suspense account on the debit side the following mistakes were found la

Credit -- an accounting entry on the bottom or right of a balance sheet. Generally an increase inliabilities or capital or a reduction in assets. Opposite of credit is debit. Every