Chapter 10 (closing off)

Question 1

Profit and Loss summary

Answer 1

A general ledger account that summarises all revenues and expenses for a reporting period, leaving a profit or loss.

Question 2

Features of a P&L summary (3)

Answer 2

1. Total of all revenue accounts appears on the credit side.
2. Total of all expenses accounts appears on the debit side.
3. Profit equals revenues less expenses.

Question 3

Net profit

Answer 3

When revenues exceed expenses for a reporting period.

Question 4

Closing entry

Answer 4

General journal entry used to close off a revenue or expense account.

Question 5

What accounts are closed off

Answer 5

Revenues and Expenses accounts only.

NO ASSETS OR LIABILITIES!

Question 6

Expenses! (debit)

Answer 6

Advertising
Cartage in
Cost of sales
Discount expense 
Freight out
Interest expense
Inventory write-down
Rent expense
Wages

Question 7

Revenues! (credit)

Answer 7

Sales
Discount revenue
Inventory gain
Sales return