Question

Explain the differences between permanent and temporary accounts and identify which types of accounts must be closed at the end of a company’s fiscal year. Additionally, recall your Week 1 Discussion in which you brainstormed a business you would like to start. For your type of business, identify at least three permanent and at least three temporary accounts your business would have and explain why each account is classified as such.

Once closing entries have been entered in the general journal and posted to the ledger, what is the effect on the owner’s capital (or retained earnings) account?

Explain the purpose of a post-closing trial balance in your own words and answer this question: Is the post-closing trial balance mandatory as a step in the accounting cycle?

Reflect on this question: Assuming a company’s first year-end, would financial statements be affected if the closing process were not completed? Explain.

Answer 1

Answer:

1. Explain the differences between permanent and temporary accounts and identify which types of accounts must be closed at the end of a company’s fiscal year.

Lasting records are those records, balance in which will be conveyed forward to next announcing period though impermanent records are those records, balance in which will be aharged to salary articulation or held income with the goal that account parity will wind up zero toward the finish of each detailing period. At the end of the day, impermanent records will be shut toward the finish of organization's financial year.

2. For your type of business, identify at least three permanent and at least three temporary accounts your business would have and explain why each account is classified as such.

Transitory record include: incomes, costs, profits, and so on.

These are pay articulation things and to be shut toward the finish of monetary year.

Permenent account include: money due, note payable, collected deterioration, and so on.

These are asset report things, balance in which will be conveyed forward.

3. Once closing entries have been entered in the general journal and posted to the ledger, what is the effect on the owner’s capital (or retained earnings) account?

When shutting passages/ closing entries have been entered in the general diary and presented on the record, it will have either positive or nagative or both impact on the proprietor's capital (or held income) account. That is, when incomes and costs related records are shut, contrast between closure adjusts of those records may result either net benefit or misfortune for the monetary year. In the event that it results net benefit, it will increment held income else it will diminish held profit. Be that as it may, shutting of profits will dependably diminish held income balance.

4. Explain the purpose of a post-closing trial balance in your own words and answer this question: Is the post-closing trial balance mandatory as a step in the accounting cycle?

Post shutting trail equalization will list the consummation adjusts of those perpetual records and it ensures that all obligations and credits are made effectively amid shutting passage passing and posting process since parities in the two charges and credits must match. It will ensure that the equalizations conveyed forward to resulting monetary year are right and there were no blunders maded as far as numerical exactness. Truly, the post shutting trail balance is obligatory as a stage in the bookkeeping cycle.

5. Assuming a company’s first year-end, would financial statements be affected if the closing process were not completed?

Accepting an organization's first year end, money related proclamations would be influenced if the end procedure were not finished in light of the fact that both pay explanation and also accounting report won't reflect adjust figures. Likewise, impermanent records will likewise be conveyed forward to consequent financial year which isn't right.