temporary account

Examples of temporary account in the following topics:

• The Post-Closing Trial Balance

  • The purpose of closing entries is to transfer the balances of the temporary accounts (expenses, revenues, gains, etc.) to the retained earnings account.
  • After the closing entries are posted, these temporary accounts will have a zero balance.
  • When the post-closing trial balance is run, the zero balance temporary accounts will not appear.
  • However, all the other accounts having non-negative balances are listed, including the retained earnings account.
  • The post-closing trial balance differs from the adjusted trial balance in only two important respects: It excludes all temporary accounts since they have been closed, and it updates the retained earnings account to its proper ending balance.

• Closing the Cycle

  • Transferring information from temporary accounts to permanent accounts is referred to as closing the books.
  • The process of closing the temporary accounts is often referred to as closing the books.
  • Closing the revenue accounts—transferring the balances in the revenue accounts to a clearing account called Income Summary.
  • Closing the Income Summary account—transferring the balance of the Income Summary account to the Retained Earnings account (also known as the capital account).
  • Closing the Dividends account—transferring the balance of the Dividends account to the Retained Earnings Account

• Dealing with Foreign Currency and Bad Debts

  • To deal with foreign currency and bad debts, we have a "gain or loss" account and methods to measure the net value of accounts receivable.
  • To deal with bad debts, companies have two methods available to them for measuring the net value of accounts receivable, which is generally computed by subtracting the balance of an allowance account from the accounts receivable account.
  • The first method is the allowance method, which establishes a contra-asset account, allowance for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for accounts receivable.
  • The allowance for bad debt/doubtful accounts is a permanent account.
  • While the corresponding bad debt expense account is a temporary account that is zeroed out annually.

• Accounting Flows and Cash Flows

  • Analyze the transaction – determine which accounts are affected, how (increase or decrease), and by how much.
  • Post to ledger – transfer the journal entries to ledger accounts.
  • Adjusting entries – prepare and post accrued and deferred items to journals and ledger T-accounts.
  • Closing entries – prepare and post closing entries to transfer the balances from temporary accounts.
  • To evaluate the 'quality' of income generated by accrual accounting.

• Effects of GAAP on the Income Statement

  • GAAP's assumptions, principles, and constraints can affect income statements through temporary (timing) and permanent differences.
  • These differences are due to the recording requirements of GAAP for financial accounting (usually following the matching principle and allowing for accruals of revenue and expenses) and the requirements of the IRS's tax regulations for tax accounting (which are more oriented to cash).
  • Such timing differences between financial accounting and tax accounting create temporary differences.
  • The historical cost principle: It requires companies to account and report based on acquisition costs rather than fair market value for most assets and liabilities.

• Support Personnel

  • At large corporations such as IBM, support personnel includes technical specialists who assist or play a key role on customer account teams.
  • While support personnel are often seen as those providing after-sales service or technical assistance, the definition of support staff also includes functions such as accounting, finance, human resources, supply chain, etc.
  • This may be ongoing as part of a key account team or on a temporary basis, with the specialists being called in to the selling situation when required.
  • In highly technical companies, the technical support salesperson is often a member of a key account team and has the title of sales engineer, professional services specialist, or something similar.
  • Highly technical companies like IBM often have technical support salespeople on major account teams.

• Secondary Groups

  • Secondary groups are large groups whose relationships are impersonal and goal oriented; their relationships are temporary.
  • Examples of secondary groups include vendor-to-client relationships, a doctor-to-patient relationship, a mechanic, an accountant, and such.
  • People in a secondary group interact on a less personal level than in a primary group, and their relationships are generally temporary rather than long lasting.
  • Examples of these would be employment, vendor-to-client relationships, a doctor, a mechanic, an accountant, and such.

• Installation

  • Installation art can be temporary - even momentary - or it can become permanently a part of a space.
  • Allan Kaprow used the term "Environment" in 1958 to describe his transformed indoor spaces which later joined such terms as 'project art' and 'temporary art. '
  • Essentially, installation/environmental art takes into account a broader sensory experience, rather than floating framed points of focus on a 'neutral' wall or displaying isolated objects on a pedestal.

• Overview of Income Tax Accounting

  • In order to properly account for income taxes, it is important to understand that the Internal Revenue Service code that governs accounting for tax liability isn't the same as the generally accepted accounting principles (GAAP) for reporting tax liability on the financial statements.
  • Temporary difference: The book income (income shown on the company financials) may be higher one year, but lower in future years.
  • In this method, the deferred income tax amount is based on tax rates in effect when the temporary differences originated.
  • This method seeks to properly match expenses with revenues in the period the temporary difference originated.
  • Summarize how to account for deferred taxes under the deferred method and the asset-liability method

• Federal Open Market Committee

  • For example, the banks' reserves fall, as people withdraw money from their bank accounts to buy presents at Christmas or when people pay their taxes in April.
  • Accordingly, the Fed uses defensive transaction to offset temporary fluctuations in bank reserves to stabilize the money supply.
  • Consequently, the REPO injects temporary reserves into the banking system.
  • Then the REPO expires, and the temporary reserves are removed from the banking system, when the dealer repurchases the REPO.