Closing entries (a) reduce the number of permanent accounts. (b) summarize the activity in every...

Question:

Closing entries

(a) reduce the number of permanent accounts.

(b) summarize the activity in every account.

(c) are prepared before the financial statements.

(d) cause the revenue and expense accounts to have zero balances.

Closing Entries:

The closing entries must be passed to calculate the net earnings of the company. Through these entries, we transfer the balance of the temporary account to the permanent account.

Answer and Explanation:

The correct option is D.

Reason:

The expenses incurred and the revenue earned during the year is used to calculate the net earning of the company and therefore all the balance of the expenses and the revenue must be transferred to the income statement. When these balances are transferred to the income statement the balance of the revenue and expense accounts becomes zero.


Learn more about this topic:

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Closing Entries: Process, Major Steps, Purpose & Objectives

from Accounting 101: Financial Accounting

Chapter 4 / Lesson 9
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