Objection!
I took part 1 of my ACC201 exam today. I missed three out of 33 questions. Two incorrect answers were entirely valid... I had given the wrong answer and recognized the correct answer once I saw the red. I have no problem admitting that whatsoever. However, the third missed question was entirely correct on my part. For all posterity, let it be known that I was right, and my damn professor is wrong.
The Question:
To which account would the balance in Insurance Expense be closed?
The Options:
a.) Income Summary
b.) Prepaid Insurance
c.) Jones, Capital
d.) Jones, Withdrawals
My Answer:
c.) Jones, Capital. Accountants have the option of first posting the closing adjustment(s) to an Income Summary account and then posting to Capital--for the convenience of then having one lump sum to credit or debit to Capital--but, in the end, it all gets posted to Capital.
The Bullshit:
My exam results came back and it showed that the correct answer was a.) Income Summary, at which point I immediately wrote an e-mail to my professor, explaining that the Income Summary account is for convenience purposes only to organize the numbers before posting to the Capital account. Whether you use Income Summary or not, all the figures are closed to Capital. Period.
"The Income Summary account is a convenience for combining the effects of the revenues and expenses before transferring their income effect to Capital. It is not necessary to use the Income Summary account in the closing process."
--Charles T. Horngren, Walter T. Harrison Jr., & Linda Smith Bamber
Accounting, fifth ed.
I received this bullshit e-mail back from him:
"Revenue and expense accounts are generally closed to Income Summary. Income Summary is then closed to Capital. Conceptually, revenues and expenses could be closed directly to Capital, but that is not the general usage. By closing revenues and expenses first to Income Summary, one has another check on the process because the balance in Income Summary before closing it should equal the net income or net loss.
Income Summary is the best answer to the question. You should follow this process for your solutions to the problems exam."
Income Summary is the best answer to the question? In other words, there can be two answers to your dumbass questions, Mister Well-This-Is-The-Way-It-Would-Be-Done-In-A-Perfect-World?
He still counted my answer wrong. I can't wait till end-of-term evaluations come around, SOB.
The Question:
To which account would the balance in Insurance Expense be closed?
The Options:
a.) Income Summary
b.) Prepaid Insurance
c.) Jones, Capital
d.) Jones, Withdrawals
My Answer:
c.) Jones, Capital. Accountants have the option of first posting the closing adjustment(s) to an Income Summary account and then posting to Capital--for the convenience of then having one lump sum to credit or debit to Capital--but, in the end, it all gets posted to Capital.
The Bullshit:
My exam results came back and it showed that the correct answer was a.) Income Summary, at which point I immediately wrote an e-mail to my professor, explaining that the Income Summary account is for convenience purposes only to organize the numbers before posting to the Capital account. Whether you use Income Summary or not, all the figures are closed to Capital. Period.
"The Income Summary account is a convenience for combining the effects of the revenues and expenses before transferring their income effect to Capital. It is not necessary to use the Income Summary account in the closing process."
--Charles T. Horngren, Walter T. Harrison Jr., & Linda Smith Bamber
Accounting, fifth ed.
I received this bullshit e-mail back from him:
"Revenue and expense accounts are generally closed to Income Summary. Income Summary is then closed to Capital. Conceptually, revenues and expenses could be closed directly to Capital, but that is not the general usage. By closing revenues and expenses first to Income Summary, one has another check on the process because the balance in Income Summary before closing it should equal the net income or net loss.
Income Summary is the best answer to the question. You should follow this process for your solutions to the problems exam."
Income Summary is the best answer to the question? In other words, there can be two answers to your dumbass questions, Mister Well-This-Is-The-Way-It-Would-Be-Done-In-A-Perfect-World?
He still counted my answer wrong. I can't wait till end-of-term evaluations come around, SOB.