Which accounts are closed to retained earnings at the end of the period, including dividends?

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Prepare for the WGU ACCT2350 Intro to Business Accounting Exam. Practice with multiple choice questions and detailed solutions to sharpen your accounting skills. Master your exam with confidence!

Multiple Choice

Which accounts are closed to retained earnings at the end of the period, including dividends?

Explanation:
Closing entries are used to reset temporary accounts and reflect the period’s results in Retained Earnings. Revenue and expense accounts are temporary; their balances are closed to Retained Earnings (through an Income Summary) to determine net income, which then updates Retained Earnings. Dividends are also closed to Retained Earnings because they represent distributions of earnings and reduce shareholders’ equity. Asset and liability accounts are permanent and are not closed; they carry their balances into the next period.

Closing entries are used to reset temporary accounts and reflect the period’s results in Retained Earnings. Revenue and expense accounts are temporary; their balances are closed to Retained Earnings (through an Income Summary) to determine net income, which then updates Retained Earnings. Dividends are also closed to Retained Earnings because they represent distributions of earnings and reduce shareholders’ equity. Asset and liability accounts are permanent and are not closed; they carry their balances into the next period.

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