Permanent vs. Temporary
What kind of account is "Cash"?
Permanent
What is the goal of closing entries?
Reset temporary accounts to 0
When is the post-closing TB prepared?
After all closing entries
What does net income do to Retained Earnings?
Increases it
If debits and credits don’t match, what should you check first?
Math error
Is “Utilities Expense” permanent or temporary?
Temporary
What account do revenues and expenses get closed into first?
Income Summary
What accounts appear in the post-closing TB?
Only permanent accounts
After closing entries, where does the profit go?
Into retained earnings
What might happen if you forget to close a temporary account?
Post-closing TB will be wrong
Why is “Drawings” not included in the post-closing TB?
It's temporary and closed to capital
Why do we clear temporary accounts?
So we can track new period revenue/expenses from $0
What proves that the post-closing TB is correct?
Debits = Credits and no temporary accounts
What does the beginning capital in the new year come from?
Ending Retained Earnings from closing entries
Why might “Service Revenue” appear on a post-closing TB by mistake?
It wasn’t closed properly
Which account types are closed each period?
Revenues, Expenses, Drawings
What is the final closing entry in the cycle?
Close Income Summary to Retained Earnings
What are the steps to prepare a post-closing TB?
Use ledger, list permanent accounts, ensure balance
How does net loss affect Retained Earnings?
Decreases it
A trial balance has $1,500 debit and $2,000 credit. What does this mean?
There’s an error, imbalance
Explain why accounts like “Prepaid Rent” and “Accounts Payable” stay on the books.
They are real balances that carry forward to next period
What happens if you skip closing entries and move to the next period?
Previous revenues/expenses mess up new period’s reporting
Why is the post-closing TB important before starting a new accounting period?
It confirms accuracy and ensures clean beginning balances
How can Retained Earnings change even if no new investments or drawings occurred?
It reflects net income/loss from the period
If a business keeps showing the wrong capital amount, where might the mistake be?
In the closing entries or beginning capital calculation