Closing entries are made
A) in order to terminate the business as an operating entity.
B) so that all assets, liabilities, and equity accounts will have zero balances when the next accounting period starts.
C) in order to transfer net income (or loss) and dividends to Retained Earnings.
D) so that financial statements can be prepared.

Question

Quizplus · Accepted Answer

Closing entries are made in order to transfer net income (or loss) and dividends to Retained Earnings. This is important for accurately reflecting the financial position of the company, as well as for preparing financial statements. Option A is incorrect as closing entries do not terminate the business. Option B is incorrect as some accounts may have balances carried forward into the next accounting period. Option D is incorrect as closing entries are not made solely for the purpose of preparing financial statements, although that is one benefit of making them.

Closing Entries Are Made