Asked by Stefanie Olivan on May 09, 2024
Verified
The goal of closing entries does NOT include:
A) to clear revenue and expense accounts.
B) to update the Capital account balance.
C) to clear the Withdrawals account.
D) to clear the Cash account.
Closing Entries
journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thereby preparing the accounts for the next period.
Capital Account
A financial statement that shows the changes in a company's equity throughout an accounting period, including contributions from and distributions to owners.
Withdrawals Account
An account used to track money taken out of a business by its owner(s) for personal use.
- Recognize and describe the purposes and processes of closing entries in accounting.
Verified Answer
DS
Dominic SantafemiaMay 10, 2024
Final Answer :
D
Explanation :
Closing entries are part of the accounting cycle used to reset the balances of temporary accounts (revenues, expenses, and withdrawals) to zero for the next accounting period. This process involves transferring their balances to permanent accounts (like the Capital account) to reflect the changes in the owner's equity. However, closing entries do not involve clearing the Cash account, as it is a permanent account whose balance carries over into the next accounting period.
Learning Objectives
- Recognize and describe the purposes and processes of closing entries in accounting.