Closing entries will:
A)increase the Owner's Capital.
B)decrease the Cash balance.
C)either increase or decrease Owner's Capital.
D)not affect the Owner's Capital balance.

Question

Quizplus · Accepted Answer

Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts. Temporary accounts like revenue, expenses, and dividends need to be closed to start the new accounting period with zero balances. The balances of these accounts are transferred to Owner's Retained Earnings (for corporations) or Owner's Capital (for sole proprietorships). Therefore, closing entries can either increase or decrease Owner's Capital depending on whether the revenue and gains exceed the expenses and losses or vice versa. However, closing entries do not affect the Cash balance directly.

Closing Entries Will