Asked by Oscar Gordillo on Jun 16, 2024
Verified
Closing entries are designed to transfer the end-of-period balances in the revenue accounts,the expense accounts,and the dividends account to retained earnings.
Closing Entries
Journal entries made at the end of an accounting period to transfer temporary accounts' balances to permanent accounts, thereby resetting the temporary accounts for the next period.
Revenue Accounts
Accounts that track the income a company generates from its normal business activities, such as sales of goods or services.
Retained Earnings
The portion of a company's profits that is kept or retained rather than paid out as dividends to shareholders, often used for reinvestment in the business.
- Gain an understanding of the essential nature and procedures involved in executing closing entries to prepare temporary accounts for a new financial period.
Verified Answer
KE
khate estradaJun 17, 2024
Final Answer :
True
Explanation :
Closing entries are necessary to transfer the balances of temporary accounts (revenue, expense, and dividends) to the permanent account (retained earnings) at the end of the accounting period. This process resets the temporary accounts so that they can begin accumulating new transactions in the next period.
Learning Objectives
- Gain an understanding of the essential nature and procedures involved in executing closing entries to prepare temporary accounts for a new financial period.