Question

Complete the following statement. The purpose of the closing process is to reset _________ (temporary/permanent) account balances to zero and to transfer the changes in all of these accounts to the Retained, _________ (Earnings/Summary/Withdrawal) account.

Answer 1

Answer:

The correct answer is temporary/earnings

Explanation:

The objective of the accounting closing is to evaluate the benefits or losses of a business activity. In other words, if the final result is positive, there is an increase in business equity, and if the final result is negative, there is a decrease in company equity.

Finally, in the accounting closing, a series of steps are carried out: the accounting regularization, the determination of the result, the closing of accounts and the presentation of annual accounts.

In conclusion, in the accounting cycle a period of time is contemplated and a set of operations and procedures are carried out in order to reflect the financial status of a company.

Answer 2

Answer:

Complete the following statement. The purpose of the closing process is to reset TEMPORARY account balances to zero and to transfer the changes in all of these accounts to the Retained EARNINGS

Explanation:

In accounting, all the revenue, expenses, gains and losses accounts are temporary, that means that they only last one accounting period (a year). At the end of the accounting period they must be closed first to the income summary account, and then that account is finally closed to the retained earnings account. The gains or losses result from the activities carried out during the accounting period, so once it ends, they must be reset to $0.

For a sole proprietorship, the proprietor's drawing account must also be closed at the end of the year.