Q14RQ - Horngren'S Financial And Managerial Accounting

Question

What are permanent accounts? Are permanent accounts closed in the closing process?

Step-by-Step Solution

Answer

Permanent accounts are the accounts which are not closed at the end of the year. No, it is not closed. 

Step 1: Explanation of closing process

Closing processes are required at the end of the year. It includes the journalizing and posting the entries to close revenues, expenses, income summary and dividends accounts.

Step 2: Explanation on closing permanent accounts

Permanent accounts include accounts related to assets, liabilities and stockholders; equity. In closing process, these accounts, balances are carried forward to next year.