For each account listed below, indicate whether it is a nominal account or a per

Question

For each account listed below, indicate whether it is a nominal account or a permanent account and identify the normal balance of the account (debit or credit). Select your answer by clicking in the drop down box to the right of each account. Be careful with matching questions because carmen randomizes the matches. Thus, if you print out the quiz to work on it and then enter your answers later in the week, it is very likely the order of the matches will be different. Therefore, exercise caution when entering your answers into carmen. Quiz scores will not be adjusted for errors in entering choices.

retained earnings

      [ Choose ]            nominal account with a normal credit balance            permanent account with a normal debit balance            permanent account with a normal credit balance            nominal account with a normal debit balance      

unearned revenue

      [ Choose ]            nominal account with a normal credit balance            permanent account with a normal debit balance            permanent account with a normal credit balance            nominal account with a normal debit balance      

dividends

      [ Choose ]            nominal account with a normal credit balance            permanent account with a normal debit balance            permanent account with a normal credit balance            nominal account with a normal debit balance      

rent expense

      [ Choose ]            nominal account with a normal credit balance            permanent account with a normal debit balance            permanent account with a normal credit balance            nominal account with a normal debit balance      

Explanation / Answer

Nominal account - An account which is closed at the end of each account period. e.g. all incomes and expenses accounts are closed and the current period profit is transferred to retained earnings account.

Permanent account - An account which is not closed at the end of accounting period.

e.g. Balance in Machinery account is not closed and is carried over to the next period.

1. retained earnings -

since balance in retained earnings account is shown in balance sheet and carried to the next period, hence retained earnings is a permanent account.

also, retained earnings account is shown in liabilities section, hence it generally has a credit balance.

hence the correct answer is (c) permanent account with a normal credit balance

2. unearned revenue -

since balance in unearned revenue account is shown in balance sheet and carried to the next period, hence unearned revenue is a permanent account.

also, unearned revenue account is shown in liabilities section, hence it generally has a credit balance.

hence the correct answer is (c) permanent account with a normal credit balance

3. dividends -

since balance in dividends account is shown in balance sheet and carried to the next period, hence dividends is a nominal account.

also, dividends account is an appropriation of profits, hence it generally has a debit balance.

hence the correct answer is (d) nominal account with a normal debit balance

4. rent expense -

since balance in rent expense account is shown in balance sheet and carried to the next period, hence rent expense is a nominal account.

also, rent expense account is an expense account, hence it generally has a debit balance.

hence the correct answer is (d) nominal account with a normal debit balance

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