Temporary vs. Permanent Accounts – MCQ

Practice Question

Intro to Financial Accounting
Financial Statements and Business Decisions
Temporary vs. Permanent Accounts
MCQs

Which of the following is a temporary account that must be closed at the end of an accounting period?

  1. Accounts Payable
  2. Retained Earnings
  3. Sales Revenue
  4. Common Stock
Answer +
Correct Answer: C
Explanation +

Temporary accounts are used to record revenues, expenses, and withdrawals during a specific period. At the end of the accounting period, these accounts are closed to zero to prepare for the next cycle.

Sales Revenue is a classic example of a temporary account. It must be closed at the end of the period so that new revenue can be recorded cleanly in the next.

Accounts Payable, Retained Earnings, and Common Stock are permanent accounts and maintain their balances across periods.