When closing entries are made:
A) All ledger accounts are closed to start the new accounting period.
B) All temporary accounts are closed but not the permanent accounts.
C) All real accounts are closed but not the nominal accounts.
D) All permanent accounts are closed but not the nominal accounts.
E) All balance sheet accounts are closed.

Question

Quizplus · Accepted Answer

Closing entries are made to transfer the balances of temporary or nominal accounts such as revenue, expenses, and dividends to the retained earnings account in the equity section of the balance sheet. Permanent or real accounts such as assets, liabilities, and equity balances are not closed because their balances continue in the new accounting period. Therefore, choice B is the best answer.

When Closing Entries Are Made