Which of the following statements best describes the purpose of closing entries?
A) To faciliate posting and taking a trial balance.
B) To determine the amount of net income or net loss for the period.
C) To reduce the balances of temporary accounts to zero so that they may be used to accumulate the revenues, expenses and dividends of the next period.
D) To complete the record of various transactions that were started in a prior period.

Question

Quizplus · Accepted Answer

The purpose of closing entries is to reset the temporary accounts (revenue, expenses, and dividends) to zero so that they can be used to accumulate the transactions for the next period. This process also helps to determine the net income or net loss for the period. It does not directly facilitate posting and taking a trial balance or complete the record of transactions from a prior period.

Which of the Following Statements Best Describes the Purpose of Closing