When closing entries are made:
A)All ledger accounts are closed to start the new accounting period.
B)All temporary accounts are closed but permanent accounts are not closed.
C)All real accounts are closed but nominal accounts are not closed.
D)All permanent accounts are closed but nominal accounts are not closed.
E)All balance sheet accounts are closed.

Question

Quizplus · Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (revenue, expenses, and dividends) to the retained earnings account. This means that permanent accounts (assets, liabilities, and equity) are not closed but carried forward to the next accounting period. Therefore, option B, "All temporary accounts are closed but permanent accounts are not closed," is the best choice.

When Closing Entries Are Made