Question

Which of the following statements are correct about closing entries? (select all that apply - i.e. just one or as many as all of them) The cash account is closed to retained earnings The account "deferred rent revenue" is usually debited They usually involve a temporary "cash summary" account The account "Accumulated depreciation" is usually credited The account "Cost of goods sold" is usually debited The account "sales revenue" is usually debited

Answer 1

Answer:-

1) False. Cash account does not closed to retained earnings account because only revenue, expense or dividend accounts are closed not asset, liabilities, common stock or retained earnings accounts.

2) True. Deferred rent revenue account is generally debited because the recipient earns revenue over time, it reduces the balance.

3) True. Becasue at the starting of an accounting period, a temporary account opens with a zero balance. Temporary accounts are closed at the end of every accounting period as their balance do not get mixed in next year.

4) True. Accumulated depreciation account is generally credited. It has a credit balance because it aggregates the amount of depreciation expense charged against a fixed asset.

5) True. Cost of goods sold account is generally debited because it is an expense item with a normal debit balance.

6) False. Sales revenue account is generally credited because revenue and gains are usually credited not debited.

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