An important purpose of closing entries is to
A)set nominal account balances to zero to begin the next period.
B)adjust the accounts in the ledger.
C)help in preparing financial statements.
D)set real account balances to zero to begin the next period.

Question

Quizplus · Accepted Answer

The purpose of closing entries is to set nominal account balances to zero to begin the next period. Nominal accounts include revenue, expenses, and dividends. Real accounts (such as assets, liabilities, and equity) are not closed at the end of the period and their balances are carried forward to the next period. Closing entries are important because they enable the company to start the next period with accurate account balances and help in preparing financial statements. Adjustment entries, on the other hand, are made to adjust the accounts in the ledger and to ensure that they reflect accurate and up-to-date information.

An Important Purpose of Closing Entries Is to