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Financial Accounting question clarification on 2nd set of questions - Royaloak41 - 02-11-2015
Second set of flash cards for Financial Accounting:
"Question 34 of 53
The Revenue and Expense accounts are considered temporary because they are closed out to the Retained Earnings account at the end of an accounting period.
Your Answer: temporary
Explanation
The Retained Earnings account is made up all the revenues (credits) less all the expenses incurred to generate the revenue (debits). The net result of Revenues minus Expenses is Net Income. Net Income is the amount that the entity's equity increases (decreases) in a given period.
Your Answer: equity"
I believe this question is incorrect. The revenue and expense accounts are temporary but are not closed to the Retained earnings account. These 2 accounts are closed to the Income Summary account which at the end of the accounting period is closed to the Retained Earnings account. Can you verify this for me? I have taken this course before and now am reviewing it as it is a prerequisite for 2 other courses I need to complete one of which is a DSST exam Principles of Finance.
Financial Accounting question clarification on 2nd set of questions - Royaloak41 - 02-11-2015
The third set of FA clarifies this. Instantcert still needs to correct this mistake/error in the 2nd set. The third set is much more clearer on the issue of Income Summary and closing entries.
Financial Accounting question clarification on 2nd set of questions - cannoda - 02-11-2015
Royaloak41 Wrote:Second set of flash cards for Financial Accounting:
"Question 34 of 53
The Revenue and Expense accounts are considered temporary because they are closed out to the Retained Earnings account at the end of an accounting period.
Your Answer: temporary
Explanation
The Retained Earnings account is made up all the revenues (credits) less all the expenses incurred to generate the revenue (debits). The net result of Revenues minus Expenses is Net Income. Net Income is the amount that the entity's equity increases (decreases) in a given period.
Your Answer: equity"
I believe this question is incorrect. The revenue and expense accounts are temporary but are not closed to the Retained earnings account. These 2 accounts are closed to the Income Summary account which at the end of the accounting period is closed to the Retained Earnings account. Can you verify this for me? I have taken this course before and now am reviewing it as it is a prerequisite for 2 other courses I need to complete one of which is a DSST exam Principles of Finance.
Both of these questions ignore Dividends, which affect the Retained Earnings account and Total Equity.
Financial Accounting question clarification on 2nd set of questions - Royaloak41 - 02-18-2015
They do because Dividends has not been covered at all. Dividends account is also a temp acc and is closed as well but this has not been covered. Plus many of the tax questions in the 3rd set are wrong. Instead of using the taxable expense account they are using interest expense account which has nothing to do with taxes payable. Also the Explanation section for taxes payable should say $30 taxes expense account not $60 Interest expense but the taxes expense should be used. They need to correct these errors.