What is the purpose of the closing process?
A)To record transactions for the period.
B)To set all account balances to zero.
C)To prepare the accounting records so they are ready to track results for the following year.
D)To adjust for accrual and deferral transactions.

Question

Quizplus · Accepted Answer

The closing process serves two purposes: (1)transfer net income (or loss)and dividends to Retained Earnings and (2)establish zero balances in all income statement and dividend accounts.The revenue and expense accounts and the Dividends accounts are considered temporary accounts because they are used to track only the current year's results and then are closed before the next year's activities are recorded.As a result,in part,closing entries prepare the accounting records so they are ready to track results for the following year.

What Is the Purpose of the Closing Process