Which of the following statements is incorrect?
A) Prepaid expense, depreciation, and unearned revenue adjusting entries involve previously recorded assets and liabilities
B) Closing entries affect the accumulated depreciation account
C) Adjusting entries can be used to record both accrued expenses and accrued revenues
D) Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time

Question

Quizplus · Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (revenues, expenses, and dividends) to permanent accounts (Retained Earnings). They do not directly affect the Accumulated Depreciation account, which is a contra-asset account associated with fixed assets and is adjusted through depreciation expense entries, not closing entries.

Which of the Following Statements Is Incorrect