A trial balance prepared after the closing entries have been posted would show a zero balance in which one of the following accounts?
A. Inventory
B. Accounts receivable
C. Accumulated depreciation
D. Income tax expense
The correct answer and explanation is :
Correct Answer: D. Income tax expense
Explanation:
A trial balance is a listing of all the accounts in the general ledger along with their balances at a given point in time. It is typically prepared at multiple stages in the accounting cycle—before and after closing entries are made.
Closing entries are journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts. Temporary accounts include:
- Revenue accounts
- Expense accounts
- Gains and losses
- Dividends (or drawings, in sole proprietorships)
These accounts are used to accumulate data for a specific accounting period and must be reset to zero so they can accurately reflect only the results of the next period.
Income tax expense, like all expense accounts, is a temporary account. At the end of the accounting period, the balance in the income tax expense account is closed (along with other expenses and revenues) to the Income Summary account, and ultimately to Retained Earnings in the closing process.
Thus, after closing entries are posted, the Income tax expense account will have a zero balance. It will remain at zero until new transactions are recorded in the next accounting period.
On the other hand:
- Inventory (A) is a permanent asset account and retains its balance.
- Accounts receivable (B) is also a permanent asset account and retains its balance.
- Accumulated depreciation (C) is a contra-asset account that is also permanent and carries forward its balance.
Therefore, only Income tax expense (D) will show a zero balance on the post-closing trial balance, confirming it as the correct answer.