Question

In: Accounting

explain why the temporary accounts are closed each period

explain why the temporary accounts are closed each period

Solutions

Expert Solution

Answer

Temporary accounts are those accounts that closed at the completion of every accounting period. For example – revenue, expense etc. The balance of these accounts are closed every year to prevent it mixing with next period.

Explanation

Temporary accounts are those accounts that closed at the completion of every accounting period. For example – revenue, expense etc. The balance of these accounts are closed every year to prevent it mixing with next period.

All the temporary accounts should be closed when the accounting period ends. It consists of all accounts of income statement that all the gains, revenue, expenses and losses.

It is necessary to close the temporary accounts at the end of the year otherwise company's statement shows fall value of the company position.

For example: If the sales revenue of a company in year one is $500,000. In the next year the sales revenue of the company is $800,000. and in the third year revenue is $1,000,000. If the temporary account of the company was not closed then the statements of the company shows the sales revenue of total $2,300,000. Hence, closing of these accounts are important.


Related Solutions

1. Explain why temporary accounts are closed. 2. Describe the four specific steps included in the...
1. Explain why temporary accounts are closed. 2. Describe the four specific steps included in the Closing Process. 3. Which account types (i.e. Assets, Liabilities, Expenses etc.) are NOT closed and why?
Temporary accounts are closed at what stage of the accounting process? Multiple Choice At the time...
Temporary accounts are closed at what stage of the accounting process? Multiple Choice At the time that adjustments are made. After adjustments are made and before the income statement is prepared. After the income statement and the statement of retained earnings are prepared, but before the balance sheet is prepared. As the last journal entries at the end of each accounting year.
which of the following accounts is not closed at the end of the accounting period a....
which of the following accounts is not closed at the end of the accounting period a. depreciation expense b. deferred service revenue c. sales d. cost of good sold
Explain the difference between permanent accounts and temporary accounts. Why does an accounting system include both...
Explain the difference between permanent accounts and temporary accounts. Why does an accounting system include both types? 175 word minimum and no plagerism please.
Why are income statement accounts considered temporary accounts? 200 words
Why are income statement accounts considered temporary accounts? 200 words
Which accounts are closed at the end of an accounting period? Select one: a. Neither Interest...
Which accounts are closed at the end of an accounting period? Select one: a. Neither Interest Expense nor Paid-in-Capital from Stock Warrants b. Both Interest Expense and Paid-in-Capital from Stock Warrants c. Interest Expense, but not Paid-in-Capital from Stock Warrants d. Paid-in-Capital from Stock Warrants, but not Interest Expense
Explain the differences between permanent and temporary accounts and identify which types of accounts must be...
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...
1.) For each of the following accounts, indicate whether the account shown is a temporary or...
1.) For each of the following accounts, indicate whether the account shown is a temporary or permanent account: Account                                   Temporary or Permanent 1. Cash                              [ Select ]                       ["Permanent", "Neither", "Temporary", "Both"]       2. Accounts Receivable                            [ Select ]                       ["Permanent", "Neither", "Both", "Temporary"]...
Explain or use evidence why each is true or false If C is any smooth, closed...
Explain or use evidence why each is true or false If C is any smooth, closed curve then Z C ex^2 dx = 0 Let F(x, y) = <P(x, y), Q(x, y)> be a vector field on R 2 and let C be a closed curve formed by the unit circle. If ∂P/∂y = ∂Q/∂x , then R C F · dr = 0. The coordinate transformation x = u2 − v2 , y = 2uv maps the quarter-disk S...
Adjusting Accounts MacKenzie Enterprise includes the following accounts in its general ledger, Explain why each of...
Adjusting Accounts MacKenzie Enterprise includes the following accounts in its general ledger, Explain why each of these accounts may need to be adjusted. Rent Payable Unearned Revenue Prepaid Subscriptions Depreciation Expense
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT