Which of the following accounts is considered a permanent account?

• A. Service Revenue
• B. Rent Expense
• C. Dividends
• D. Retained Earnings

Answer: (D)

Verified step by step guidance

1. Understand the difference between permanent and temporary accounts. Permanent accounts (also known as real accounts) are not closed at the end of the accounting period and their balances are carried forward to the next period. Temporary accounts (also known as nominal accounts) are closed at the end of the accounting period and their balances are reset to zero.
2. Identify the nature of each account listed in the problem: Service Revenue, Rent Expense, Dividends, and Retained Earnings.
3. Service Revenue is a temporary account because it is used to record income earned during a specific period and is closed to Retained Earnings at the end of the period.
4. Rent Expense is also a temporary account because it records expenses incurred during a specific period and is closed to Retained Earnings at the end of the period.
5. Retained Earnings is a permanent account because it represents the cumulative net income (or loss) of the company that has been retained, rather than distributed as dividends, and its balance is carried forward to the next accounting period.