Which type of account carries its balance forward to the next accounting period?

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Multiple Choice

Which type of account carries its balance forward to the next accounting period?

Explanation:
Permanent accounts carry their balances forward to the next accounting period. These accounts—assets, liabilities, and equity (such as cash, accounts payable, and retained earnings)—represent the ongoing financial position of the business, so their ending balances become the beginning balances in the next period. Temporary accounts, like revenues and expenses (and dividends), are closed at period end to zero, with their net effect transferred to retained earnings, so they don’t carry forward. Therefore, the type of account that carries forward is permanent accounts.

Permanent accounts carry their balances forward to the next accounting period. These accounts—assets, liabilities, and equity (such as cash, accounts payable, and retained earnings)—represent the ongoing financial position of the business, so their ending balances become the beginning balances in the next period. Temporary accounts, like revenues and expenses (and dividends), are closed at period end to zero, with their net effect transferred to retained earnings, so they don’t carry forward. Therefore, the type of account that carries forward is permanent accounts.

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