Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals account to a balance sheet equity account.

Question

Quizplus · Accepted Answer

Closing entries summarize the company's activities over a given period and transfer the balances of temporary accounts (revenue, expense, and withdrawals accounts) to the permanent equity account on the balance sheet. This process allows the company to start a new period with zero balances in the temporary accounts.

Closing Entries Are Designed to Transfer the End-Of-Period Balances in the Revenue