Which of the following lists contains only temporary accounts?

• A. Cash, Accounts Receivable, Service Revenue
• B. Service Revenue, Rent Expense, Dividends
• C. Common Stock, Retained Earnings, Dividends
• D. Prepaid Rent, Salaries Payable, Rent Expense

Answer: (B)

Verified step by step guidance

1. Understand the concept of temporary accounts: Temporary accounts are those that are closed at the end of an accounting period. They include revenue, expense, and dividend accounts, which are used to track financial activity during a specific period and are reset to zero for the next period.
2. Identify the permanent accounts: Permanent accounts are not closed at the end of the accounting period and include assets, liabilities, and equity accounts. Examples are Cash, Accounts Receivable, Common Stock, Retained Earnings, Prepaid Rent, and Salaries Payable.
3. Analyze the options provided: Review each list to determine which accounts are temporary. Temporary accounts include Service Revenue, Rent Expense, and Dividends because they are closed at the end of the period.
4. Eliminate lists containing permanent accounts: For example, the list 'Cash, Accounts Receivable, Service Revenue' contains Cash and Accounts Receivable, which are permanent accounts, so it cannot be correct.
5. Select the correct list: The list 'Service Revenue, Rent Expense, Dividends' contains only temporary accounts, making it the correct answer.