Closing entries are necessary to assure that the company's net income for an accounting period is accurately determined.

Question

Quizplus · Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (like revenues, expenses, and dividends) to permanent accounts (like Retained Earnings) to prepare the accounts for the next accounting period, not to determine net income. Net income is determined by preparing an income statement before closing entries are made.

Closing Entries Are Necessary to Assure That the Company's Net