What Form 1120 Schedule M 3 Ledger 2019-2024

So now we're going to talk about temporary and permanent accounts. These are basic and simple concepts. 2. Temporary accounts are accounts that you would close at the end of the accounting period. They do not carry over year after year. They are closed every single year during the accounting process. 3. Temporary accounts mainly include revenue, expenses, and dividends. It makes sense to close these accounts because you generally don't want to carry over expenses year after year. Ideally, you want to pay them off or record them somewhere else. 4. On the other hand, permanent accounts are accounts that you carry over year after year. Examples of permanent accounts include all assets, liabilities, common stock, and retained earnings. 5. Permanent accounts, like cash and land, should be carried over year after year. It wouldn't make sense if they suddenly disappeared at the end of the year. You want to retain them. 6. Liabilities are also considered permanent accounts. It would be illogical for a debt to disappear at the end of the year if it hasn't been paid off yet. 7. Common stock and retained earnings are also permanent accounts. These accounts, along with revenue, expenses, and dividends, would be closed at the end of the year during the accounting period and transferred to retained earnings. 8. The reason why revenue, expenses, and dividends can be closed is that they are calculated and carried into retained earnings. This is because the retained earnings equation is revenue minus expenses minus dividends. 9. To summarize, temporary accounts include revenue, expenses, and dividends, while permanent accounts include assets, liabilities, common stock, and retained earnings. 10. It is important to understand the different types of accounts in accounting as they play a vital role in financial statements and overall bookkeeping processes.