MANAGEMENT

Detailed explanation-1: -Answer and Explanation: True. Yes, all the temporary accounts gets reduced to Zero balance at the end of the year for transferring the net income earned or net expenses to their respective capital accounts.

Detailed explanation-2: -The income summary account is a temporary account into which all income statement revenue and expense accounts are transferred at the end of an accounting period. The net amount transferred into the income summary account equals the net profit or net loss that the business incurred during the period.

Detailed explanation-3: -Afterward, the balance in the income summary account is transferred to the retained earnings account if the business is a corporation or to the capital account of the owner for a sole proprietorship. Only then is the account closed.

Detailed explanation-4: -At the end of the fiscal year, closing entries are used to shift the entire balance in every temporary account into retained earnings, which is a permanent account.

Detailed explanation-5: -Most temporary accounts are on the income statement. But a few show up on the balance sheet. Over a fiscal year, the temporary account starts with a zero balance on January 1. Through your bookkeeping, you record your company’s transactions during the year.