Question

The final stage in the accounting cycle may involve doing which of the following? (check all that apply)

crediting expense accounts

closing out temporary accounts

debiting revenue accounts

closing out permanent accounts

Answer 1

Yes, crediting Expeses accounts

Temporary Accounts are those accounts which cannot be carried to the next accounting year, like Revenue, expenses, drawings etc.

So last stage in the accounting cycle is close all temporary accounts.

Yes debited revenue accounts

Permanent accounts are those accounts which should be carried to next accounting year, like assets, Liabilites, Capital accounts, so these should not be closed.

Example:

Particular

Service Revenue

Net Sales

To Income Summary

Income Summary

To Cost of goods sold

To Depreciation-Office Equipment

To Depreciation-Computer Equipment

To Wages Expense

To Insurance Expense

To Rent Expense

To Computer Supplies Expense

To Advertising Expense

To Mileage Expense

To Repairs Expense-Computer

Capital

To Drawings

Income Summary

To Capital account