Note that the income summary account is not absolutely necessary - the revenue and expense accounts could be closed directly to retained earnings. Supplies Expense O c. Withdrawals d. Prepaid Insurance Interest Revenue O b. In other words, debiting an expense account increases the balance instead of decreasing it like most other equity accounts. The outcome of a nominal account is either profit or loss, which is then ultimately transferred to the capital account. At the beginning of April, Logan Enterprises had a $400 balance in the Supplies account. Salaries Expense b. Determine the adjusted balance in the company's supplies account on January 31. asked May 11, 2016 in Business by NewYorker. Multiple Choice. At April 30, the company had $350 of supplies on hand. The expense accounts and withdrawal accounts will now also be zero. 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. Next, you transfer expense balances. Accounting > Closing Entries The following table shows the way this transaction is recorded. Office supplies expense. 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. But this account is not closed in the income statement i.e. Step 2: Closing the expense accounts. The balance in the supplies expense account that will be closed to Income Summary is . Prepaid insurance. A company’s expenses are … At the end of each fiscal year, a company prepares for the new fiscal year by closing its books. Examples include a purchase account, sales account, salary A/C, commission A/C, etc. Revenue and expense accounts are closed to Income Summary, and Income Summary and Dividends are closed to the permanent account, Retained Earnings. Thus, the supplies expense should be … 3. The retained earnings account is #33 and the income summary account is #34 in the ledger of PS Music. red 1.00 Select one: O a. How to Close an Expense Account. Since $763 of supplies were used up, the supplies expense is $763. A contra account is an account used in a general ledger to reduce the value of a related account. a. A) Debit ... ; debit the expense accounts C) Credit Income Summary; debit the expense accounts D) Debit Income Summary; credit the expense accounts. During the month, Logan purhchased additional supplies for $500. The income summary account offers the benefit of indicating the net balance between revenue and expenses (i.e. 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 normal balance for the supplies expense account is a debit balance. The purchase of an asset such as land or equipment is not considered a simple expense but rather a capital expenditure. Therefore, accounts payable is a critical metric to analyze when a company is up for consideration for possible merger or acquisition activity. d. $550. 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. Close the expense account into the income statement at the end of a fiscal year or accounting period. 4. When you use an accounts payable account, you enter the bills that you get from vendors when you receive them. answered May 11, 2016 by geico . Answer to Which of the following accounts is not closed? Closing entry 2: Mr. Green has eight income statement accounts with debit balances; they are all expense accounts. Which one of the following accounts is closed at year-end? 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.. 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. Drawings account is one of the temporary accounts and is closed at the end of accounting period. 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? This step closes all expense accounts. 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. Expenses are resources used up. $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. 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. 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. B. Lippe Equipment Repair Service's total assets on May 31 $ 36,190. The accounting for office or store supplies is similar to prepaid or unexpired expenses. Best answer. 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. Accumulated Depreciation. You close the account by offsetting the account balance with an equal opposite entry. c. .$500. At the end of the period it is necessary to close all temporary accounts. How do you close the expense accounts? 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 ). Prepare a post-dosing trial balance. 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. Unearned revenue net income) during the closing process. Therefore, debit income summary account by $1,402,500. Expense accounts are considered contra equity accounts because their balance decreases the overall equity balance. Examples of temporary accounts are sales and expenses. A corresponding credit entry is made that will reduce an asset or increase a liability. Worksheet (Use the information from the trial balance in Exam Figure 2. The books are closed by reseting the temporary accounts for the year. Close Expense accounts to Income Summary by debiting Income Summary and crediting Expense accounts. $400. $763 of supplies were used up in January. b. 2. 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. Write the worksheet information on the form in Exam Figure 1.) Thanks ----- Which of the following accounts should be closed to Income Summary at the end of the fiscal year? $350. 0 votes. Expenses in double-entry bookkeeping are recorded as a debit to a specific expense account. Journalize and post the closing entries. Based on the adjusted trial balance, determine the following: A. Lippe Equipment Repair Service's net income for May $ 2,290. accounting-and-taxation; 0 Answers. These accounts are temporary because they keep their balances during the current accounting period and are set back to zero when the period ends. We will close sales discounts, sales returns and allowances, cost of goods sold, and all other operating and nonoperating expenses. Closing entries allow a corporation to close temporary accounts, such as revenue and expenses. Only revenue, expense, and dividend accounts are closed—not asset, liability, Common Stock, or Retained Earnings accounts. Therefore, credit all these expense and debit accounts with their respective amounts. 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. 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. Close contra-revenue accounts and expense accounts with debit balances. Nominal Accounts are accounts related and associated with losses, expenses, income, or gains. 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. A contra account's natural balance is the opposite of the associated account. Since owner's equity's normal balance is a credit balance, an expense must be recorded as a debit. 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