The purpose of closing entries is to
A)update a periodic inventory account for credit sales
B)update the retained earnings account on a daily basis
C)apportion prepaid expenses and unearned revenues to bring the accounts up to date
D)reduce all temporary accounts to zero

Question

Quizplus · Accepted Answer

The purpose of closing entries is to reduce all temporary accounts (such as revenue, expense, and dividend accounts) to zero in order to transfer their balances to the permanent retained earnings account. This process ensures that the next accounting period starts with a clean slate and that the financial statements accurately reflect the company's performance for the period. Options A, B, and C are not related to the process of closing entries.

The Purpose of Closing Entries Is to