Which of the following correctly describes the closing entry process?
A)The closing process reduces the balances in the permanent accounts to zero at the end of each period.
B)The closing entries are usually prepared prior to the adjusted trial balance.
C)The closing process creates a zero balance in all temporary accounts at the end of each period.
D)The closing process creates a zero balance at the end of each period for all accounts on the year-end trial balance.

Question

Quizplus · Accepted Answer

The closing process involves transferring the balances of temporary accounts, such as revenue and expense accounts, to the retained earnings or owner's equity account. This process creates a zero balance in all temporary accounts, indicating that the accounting period has ended and a new period has begun. The balances of permanent accounts, such as asset, liability, and equity accounts, are not affected by the closing process and carry forward to the next accounting period. Therefore, options A, B, and D are incorrect.

Which of the Following Correctly Describes the Closing Entry Process