What is the correct order for the steps in the closing process?
I Close the drawings account to the owner's capital account
II Balance the owner's capital account
III Transfer the profit or loss to the owner's capital account
IV Close the income and expense accounts to the profit or loss summary account
A) III, IV, II, I
B) IV, III, I, II.
C) IV, III, I, II
D) IV, III, II, I.

Question

Quizplus · Accepted Answer

The correct order for the closing process in accounting is to first close the income and expense accounts to the profit or loss summary account (IV), then transfer the profit or loss to the owner's capital account (III), close the drawings account to the owner's capital account (I), and finally balance the owner's capital account (II). This sequence ensures that all revenues and expenses are accounted for in determining the period's profit or loss, which is then reflected in the owner's equity, and any drawings by the owner are adjusted before the final balance is determined.

What Is the Correct Order for the Steps in the Closing