Closing entries: Group of answer choices are prepared before the financial statements. reduce the number of permanent accounts. cause the revenue and expense accounts to have zero balances. summarise the activity in every account.
Question
Closing entries: Group of answer choices
are prepared before the financial statements.
reduce the number of permanent accounts.
cause the revenue and expense accounts to have zero balances.
summarise the activity in every account.
Solution
Closing entries:
-
Are not prepared before the financial statements. The financial statements are prepared first to determine the final balances of the accounts for the period. Closing entries are then prepared to close out the temporary accounts.
-
Do not reduce the number of permanent accounts. Permanent accounts, also known as real accounts, include asset, liability, and equity accounts. These accounts are not closed at the end of the accounting period.
-
Cause the revenue and expense accounts to have zero balances. Revenue and expense accounts are temporary accounts, also known as nominal accounts. These accounts are closed at the end of the accounting period to prepare for the next period. The balances in these accounts are transferred to the income summary account, causing them to have zero balances.
-
Do not summarise the activity in every account. Closing entries only affect the temporary accounts. They do not summarise the activity in the permanent accounts.
Therefore, the correct answer is: closing entries cause the revenue and expense accounts to have zero balances.
Similar Questions
The conceptual framework of accounting defines the elements of the financial statementsGroup of answer choicesTrueFalse
The worksheetGroup of answer choicesis an integral part of the accounting cycleeliminates the need to rewrite the financial statementsis a working paper that is requiredis used to summarize account balances and adjustments for the financial statements
General purpose financial statements are designed toGroup of answer choicesmeet all of the common needs of all primary usersmeet none of the needs of users of financial informationmeet most of the common needs of most primary usersmeet all the information needs of the primary users
When closing the general ledger to determine profit for the reporting period, the following recording must take place.Group of answer choicesAll asset accounts are debited, and liability accounts are credited. Asset accounts are credited in retained earnings and liability accounts are debited in retained earnings.All asset accounts are credited, and liability accounts are debited. Asset accounts are debited in retained earnings and liability accounts are credited in retained earnings.All revenue accounts are debited, and expense accounts are credited. Revenue accounts are credited in retained earnings and expense accounts are debited in retained earnings.All revenue accounts are credited, and expense accounts are debited. Revenue accounts are debited in retained earnings and expense accounts are credited in retained earnings.
Which of these is not one of the steps in the accounting process?Group of answer choicesCommunicatingIdentifyingMeasuringObserving
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.