Closing the accounts refers to:
A) establishing zero balances in the balance sheet accounts.
B) establishing a zero balance in the cash at bank account.
C) establishing zero balances in all ledger accounts.
D) transferring income and expense account balances to the profit or loss summary account, which is then closed to the equity account.

Question

Quizplus · Accepted Answer

Closing the accounts involves transferring the balances of income and expense accounts to the profit or loss summary account. This summary account is then closed to the equity account, which results in a zero balance in the income and expense accounts for the new accounting period. Therefore, option D is the correct choice. Options A, B, and C are incorrect because they do not fully describe the process of closing accounts.

Closing the Accounts Refers To