Closing entries are made
A) in order to terminate the business as an operating entity.
B) so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts.
C) in order to transfer Profit (or loss) and owner's drawings to the owner's capital account.
D) so that financial statements can be prepared.

Question

Quizplus · Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (like revenues, expenses, and drawings) to the owner's capital account, reflecting the changes in the owner's equity due to the year's operations and withdrawals. This process does not zero out assets, liabilities, or the owner's capital account itself, nor is it done to terminate the business or specifically to prepare financial statements, although it is a step in the accounting cycle that precedes financial statement preparation.

Closing Entries Are Made