$350. red 1.00 Select one: O a. b. Close these accounts by debiting income summary for an amount equal to the combined debit balances of all eight expense accounts and by crediting each expense account for an amount equal to its own debit balance. Accounting > Closing Entries Nominal or temporary accounts are income statements accounts that are closed to Income Summary at the end of the reporting period.. Real or permanent accounts are balance sheet accounts which have a continuous nature and accumulate data from period to period; such accounts are not closed at the end of the reporting period.. At the beginning of April, Logan Enterprises had a $400 balance in the Supplies account. Thus, if the amount of the office supplies were $500, the journal entry would be a debit of $500 to the office supplies expense account and a credit of $500 to the accrued expenses liability account. Expenses are resources used up. Account Debit: Credit: Income Summary 268,050 Sales Discounts: 2,000 For each of these could someone elaborate on how they got the answer. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. $763 of supplies were used up in January. But this account is not closed in the income statement i.e. Revenue and expense accounts are closed to Income Summary, and Income Summary and Dividends are closed to the permanent account, Retained Earnings. Balance sheet accounts are called real or permanent accounts because they continue to accumulate on the balance sheet from period to period for the life of the account. The accounting for office or store supplies is similar to prepaid or unexpired expenses. Closing entry 2: Mr. Green has eight income statement accounts with debit balances; they are all expense accounts. The books are closed by reseting the temporary accounts for the year. At the end of the period it is necessary to close all temporary accounts. 0 votes. How do you close the expense accounts? Examples of temporary accounts are sales and expenses. 3. A corresponding credit entry is made that will reduce an asset or increase a liability. You’ll need the following adjustment information: a. P. Woodsley counted the supplies on May 31 and found that the supplies on hand were $342.92. Income Statement accounts are called nominal or temporary accounts because income statement accounts are closed at the end of a reporting period to bring the balances to zero. Expenses in double-entry bookkeeping are recorded as a debit to a specific expense account. Journalize and post the closing entries. Unearned revenue Office supplies expense. A contra account's natural balance is the opposite of the associated account. In other words, debiting an expense account increases the balance instead of decreasing it like most other equity accounts. Nominal Accounts are accounts related and associated with losses, expenses, income, or gains. Step 2: Closing the expense accounts. Therefore, credit all these expense and debit accounts with their respective amounts. 4. Worksheet (Use the information from the trial balance in Exam Figure 2. Which one of the following accounts is closed at year-end? Closing entries, also called closing journal entries, are entries made at the end of an accounting period to zero out all temporary accounts and transfer their balances to permanent accounts. $400. The income summary account offers the benefit of indicating the net balance between revenue and expenses (i.e. The expense accounts and withdrawal accounts will now also be zero. Thus, the supplies expense should be … d. $550. net income) during the closing process. Expense accounts are considered contra equity accounts because their balance decreases the overall equity balance. Since $763 of supplies were used up, the supplies expense is $763. It is done by debiting income summary account and crediting various expense accounts. Salaries Expense b. Close Income Summary to Capital account by debiting Income Summary and crediting Capital account. Cost of goods sold, Selling Expense, Administrative Expense, Interest Expense, and Store supplies expense accounts are closed by transferring their amount to Income Summary account. The balance in the supplies expense account that will be closed to Income Summary is . A contra account is an account used in a general ledger to reduce the value of a related account. To continue with the preceding example, the $500 entry would reverse in the following month, with a credit to the office supplies expense account and a debit to the accrued expenses liability account. These accounts are temporary because they keep their balances during the current accounting period and are set back to zero when the period ends. Examples include a purchase account, sales account, salary A/C, commission A/C, etc. accounting-and-taxation; 0 Answers. We will close sales discounts, sales returns and allowances, cost of goods sold, and all other operating and nonoperating expenses. Multiple Choice. The four basic steps in the closing process are: Closing the revenue accounts —transferring the credit balances in the revenue accounts to a clearing account called Income Summary. Since owner's equity's normal balance is a credit balance, an expense must be recorded as a debit. Only revenue, expense, and dividend accounts are closed—not asset, liability, Common Stock, or Retained Earnings accounts. Close contra-revenue accounts and expense accounts with debit balances. b. $9,880 fees revenue - $780 supplies expense - $390 insurance expense - $970 rent expense - $4,290 wages expense - $120 telephone expense - $1,040 income taxes expense = $2,290. 142. Write the worksheet information on the form in Exam Figure 1.) The outcome of a nominal account is either profit or loss, which is then ultimately transferred to the capital account. Next, you transfer expense balances. Close the expense account into the income statement at the end of a fiscal year or accounting period. asked May 11, 2016 in Business by NewYorker. c. .$500. B. Lippe Equipment Repair Service's total assets on May 31 $ 36,190. How to Close an Expense Account. Therefore, accounts payable is a critical metric to analyze when a company is up for consideration for possible merger or acquisition activity. Answer to Which of the following accounts is not closed? At the end of each fiscal year, a company prepares for the new fiscal year by closing its books. Prepaid insurance. Journal Entry 5 automatically debits office supplies expense for $1,000 and credits accounts payable for $1,000. When supplies are purchased, the amount will be debited to Supplies. Accumulated Depreciation. Thanks ----- Which of the following accounts should be closed to Income Summary at the end of the fiscal year? At the end of the accounting period, the balance in the account Supplies will be adjusted to be the amount on hand, and the amount of the adjustment will be recorded in Supplies Expense. Note that the income summary account is not absolutely necessary - the revenue and expense accounts could be closed directly to retained earnings. This step closes all expense accounts. The following table shows the way this transaction is recorded. The purchase of an asset such as land or equipment is not considered a simple expense but rather a capital expenditure. Best answer. Close Expense accounts to Income Summary by debiting Income Summary and crediting Expense accounts. A company’s expenses are … 2. When you use an accounts payable account, you enter the bills that you get from vendors when you receive them. Why Expenses Are Debited Expenses cause owner's equity to decrease. a. Closing entries allow a corporation to close temporary accounts, such as revenue and expenses. Therefore, debit income summary account by $1,402,500. You close the account by offsetting the account balance with an equal opposite entry. The normal balance for the supplies expense account is a debit balance. During the month, Logan purhchased additional supplies for $500. a. Supplies Expense O c. Withdrawals d. Prepaid Insurance Drawings account is one of the temporary accounts and is closed at the end of accounting period. Based on the adjusted trial balance, determine the following: A. Lippe Equipment Repair Service's net income for May $ 2,290. Prepare a post-dosing trial balance. Closing temporary accounts to the company’s income summary account allows the company to begin the next accounting cycle with a zero balance in the revenue and expense accounts. Supplies Expense c. Fees Revenue d. Accumulated Depreciation Which of the following accounts should be closed to Income Summary at the end of the fiscal year? answered May 11, 2016 by geico . trading account or profit and loss account rather it is closed in the capital account of the owner which is reported in the statement of financial position. Determine the adjusted balance in the company's supplies account on January 31. The balances of these accounts have been absorbed by the capital account – Mr. Gray, Capital , which now has a balance of $7,260 ($13,200 beginning balance + $1,060 in step #3 - $7,000 in step #4 ). 143. The retained earnings account is #33 and the income summary account is #34 in the ledger of PS Music. A) Debit ... ; debit the expense accounts C) Credit Income Summary; debit the expense accounts D) Debit Income Summary; credit the expense accounts. Interest Revenue O b. At April 30, the company had $350 of supplies on hand. 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