Select the statement that best describes the primary purpose of preparing closing entries.
A) To facilitate adjusting entries.
B) To reduce the balances in the temporary accounts to zero in order to accumulate the revenues and expenses of the next period.
C) To complete the recording of various transactions which are begun in one period and concluded in a later period.
D) To determine the amount of proﬁt or loss for the period.

Question

Quizplus · Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (revenues, expenses, dividends) to permanent accounts (Retained Earnings) at the end of an accounting period. This resets the balances of the temporary accounts to zero, readying them to accumulate transactions in the next period.

Select the Statement That Best Describes the Primary Purpose of Preparing