CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger
Which one of the following ledger balances is carried forward to the next accounting period as an opening balance, rather than being closed by transfer to the Trading or Profit and Loss Account?
Outstanding Rent is carried forward because it is a liability shown in the Balance Sheet. Wages, discount allowed and carriage inwards are nominal expense accounts, which are closed by transfer to the Trading or Profit and Loss Account at the end of the period.
- AWages account
- BOutstanding Rent account (liability)Correct
- CDiscount Allowed account
- DCarriage Inwards account
Explanation
Wages, discount allowed and carriage inwards are nominal accounts relating to expenses, so they are transferred to Trading or P&L at period end. Outstanding rent is a liability, so it appears in the Balance Sheet and is carried forward as a balance. It is a personal-type account balance, not a nominal expense closing.
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