The purpose of closing entries is to transfer:
A. Inventory to Cost of Goods Sold when merchandise is sold.
B. Accounts Receivable to Retained Earnings when an account is fully paid.
C. Balances in temporary accounts to a permanent account.
D. Assets and liabilities when operations are discontinued.

Question

09-12-2022
SAT

Answered

The purpose of closing entries is to transfer:
A. Inventory to Cost of Goods Sold when merchandise is sold.
B. Accounts Receivable to Retained Earnings when an account is fully paid.
C. Balances in temporary accounts to a permanent account.
D. Assets and liabilities when operations are discontinued.

Answer :

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aashvi1 aashvi1 · Answer 1 · 2022-12-14T20:24:05-05:00

The general ledger, the method for keeping track of a company's financial information, uses the closing entry to reset the temporary account balances to zero. Accounting activity over a particular time period is recorded using temporary accounts.

What does the closing entries quizlet serve?

Transferring the period's net profit or loss to retained earnings is one of the goals of closing entries. A second goal is to "zero-out" all temporary accounts (revenue, expense, and dividends) so that they have a balance of zero at the beginning of each new month.

What are closing entries used for, and when are they prepared?

At the conclusion of an accounting period, a closure entry is performed to move balances from a temporary account to a permanent account. Temporary accounts, which display balances for a single accounting period, are reset to zero by companies using closing entries.

Why do the books need to be closed at the end of an accounting period?

One of the main reasons to close your books at the end of each accounting period is so that you may create financial statements that show you the financial health of your company. Most small businesses compile a balance sheet and an income statement as their financial statements.

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