Closing entries are made
A) in order to terminate the business as an operating entity.
B) so that all assets liabilities and owner's capital accounts will have zero balances when the next accounting period starts.
C) in order to transfer net income (or loss) and owner's drawings to the owner's capital account.
D) so that financial statements can be prepared.

Question

Quizplus · Accepted Answer

Closing entries are made in order to transfer net income (or loss) and owner's drawings to the owner's capital account at the end of the accounting period. This prepares the accounts for the next period's transactions, and allows for the preparation of the financial statements. Option A is incorrect because closing entries do not terminate the business. Option B is incorrect because it is not necessary for all accounts to have zero balances at the end of the accounting period.

Closing Entries Are Made