What is the purpose of closing the books?
A)To reset the revenue and expense accounts to zero so that they are ready to record the next period's transactions
B)To reset the asset and liability accounts to zero so that they are ready to record the next period's transactions
C)To transfer all account activity to retained earnings so that they are ready to record the next period's transactions
D)To transfer all account activity to paid-in-capital so that they are ready to record the next period's transactions
E)To transfer and reset any account with activity during the prior period to zero

Question

Quizplus · Accepted Answer

Closing the books involves transferring the balances of revenue and expense accounts to retained earnings (or the equivalent account) and resetting these accounts to zero for the next period. This process allows for accurate tracking of financial performance in each accounting period.

What Is the Purpose of Closing the Books