Understanding Temporary vs Permanent Accounts Quiz

What is the primary characteristic of temporary accounts?

• They track long-term financial status.

• They are reset at the end of the accounting period.

• They include all asset accounts.

• They cannot be closed.

Which of the following is an example of a temporary account?

• Accounts Payable

• Revenue

• Buildings

• Common Stock

What defines a permanent account?

• An account that is closed at the end of the accounting period.

• An account that holds balances over fiscal periods.

• An account used only for internal transactions.

• An account that records temporary financial transactions.

Which of the following is NOT a permanent account?

• Inventory

• Salaries Expense

• Retained Earnings

• Land

Expenses are considered what type of account?

• Permanent

• Temporary

• Both A and B

• Neither A nor B

Which account would typically be closed to Capital at the end of the fiscal year?

• Accounts Receivable

• Drawing

• Prepaid Rent

• Accumulated Depreciation

What is the main purpose of closing temporary accounts?

• To update the balances of permanent accounts.

• To prepare the temporary accounts for the next accounting period.

• To permanently archive financial transactions.

• To comply with tax regulations.

Which of the following accounts would you expect to see a balance carried forward into the next accounting period?

• Sales Revenue

• Rent Expense

• Equipment

• Cost of Goods Sold

The balance of which type of account is NOT reset to zero at the end of the accounting period?

• Revenue

• Expense

• Liability

• Dividend

Which of the following best describes the relationship between temporary and permanent accounts?

• Temporary accounts are used to calculate the balances of permanent accounts.

• Permanent accounts are closed each period, while temporary accounts are not.

• Temporary and permanent accounts are completely unrelated.

• Temporary accounts are closed to a permanent account (Retained Earnings) at the end of the period.