Question

The entries that transfer the revenue, expense, and dividends balances to the Retained Earnings account to prepare the company's books for the next period are called ________ entries. Select one: A. closing B. opening C. end of period D. adjusting

Answer 1

Answer:

A.Closing

Explanation:

These are called closing entries as a nominal account called income summary account is created to transfer the expenses and income from profit and loss account to balance sheet for closing the accounts.

Answer 2

Answer:

A) closing

Explanation:

Closing entries are carried out at the end of every accounting period in order to transfer the net profits or losses to the retained earnings account. All the accounts that are included in the balance sheet, revenues, expenses, profits or losses, must be closed to income summary account.

E.g.

Dr Income summary              or                         Dr Revenues

    Cr Expenses                                                       Cr Income summary

At the end, the income summary account will be closed to retained earnings account:

if profits were made:                              if losses were suffered:

Dr Income summary                                 Dr Retained earnings

    Cr Retained earnings                                 Cr Income summary

Dividends are closed directly to retained earnings:

Dr Dividends              closed to                  Dr Retained earnings

    Cr Cash                                                         Cr Dividends

Temporary accounts must be closed in order to be able to start the new accounting period with 0 revenues and 0 expenses. Temporary accounts are not included in the balance sheet.