The purpose of closing entries is to transfer:
A) Accounts receivable to retained earnings when an account is fully paid.
B) Balances in temporary accounts to a permanent account.
C) Inventory to cost of goods sold when merchandise is sold.
D) Assets and liabilities when operations are discontinued.

Question

Quizplus · Accepted Answer

The purpose of closing entries is to transfer balances in temporary accounts (revenue, expenses, and dividends) to a permanent account (retained earnings). This resets the temporary accounts to zero in preparation for the next accounting period. Accounts receivable, inventory, and assets/liabilities are not necessarily transferred during the closing process.

The Purpose of Closing Entries Is to Transfer