BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Because the accountant closes the offices containing the accounting books when finished.
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Because when the work was done manually, accountants literally closed books when they were done.
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Because the value of zero is used in all closing entries the accountant journalizes.
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Because the accountant is zeroing out the accounts of the previous accounting period.
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Detailed explanation-1: -The purpose of the closing entry is to reset the temporary account balances to zero on the general ledger, the record-keeping system for a company’s financial data. Temporary accounts are used to record accounting activity during a specific period.
Detailed explanation-2: -Accountants use closing entries to update the owner’s capital account and match the ending capital balance with the statement of owner’s equity. Being able to record a company’s closing entry helps these financial professionals clear a temporary account and prepare for the new accounting cycle.
Detailed explanation-3: -A closing entry is a journal entry that is made at the end of an accounting period to transfer balances from a temporary account to a permanent account. Companies use closing entries to reset the balances of temporary accounts − accounts that show balances over a single accounting period − to zero.
Detailed explanation-4: -Temporary accounts in accounting refer to accounts you close at the end of each period. Temporary accounts are general ledger accounts. All income statement accounts are considered temporary accounts. You must close temporary accounts to prevent mixing up balances between accounting periods.