In-Class Solutions 1

In-Class Solutions 1 - ValenciaCommunityCollege...

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Assignment 1.0 Solution – Battiste 2. A permanent account is an account whose balance carries over from one period to the next. A temporary account is an account whose balance does NOT carry over from one period to the next. Any asset, liability or owner’s equity account is permanent. All other accounts are temporary. For example, cash, supplies, land, building, truck, equipment, accounts payable and Smith, Capital are permanent accounts and sales and all expense accounts are temporary. Temporary accounts get closed at the end of each period. This means that the balances of temporary accounts will be transferred into the owner’s equity accounts. The purpose of closing entries (or the closing process) is to transfer temporary accounts to the owner’s equity (retained earnings if it is a corporation or the capital account if it is a p-ship or sole-prop). Temporary accounts only hold a balance for the current period. When the period is over, the balance is transferred to the OE. Thus, temporary accounts always begin a new accounting period at zero. Temporary accounts are used to keep track of the changes to owner’s equity during the period. 3. Hi, I’m Cecil. I’m bespectacled, bald and occasionally phunny. 5. Profit, also known as net income or net loss, is the difference between revenues and expenses for a given period of time. Profit is calculated by deducting total expenses from total revenues. It is reported on the income statement which is also known as the statement of operations. 1
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This note was uploaded on 06/14/2011 for the course ACG 2021 taught by Professor Larson during the Spring '08 term at Valencia.

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In-Class Solutions 1 - ValenciaCommunityCollege...

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