Question

The Bible in Luke 14:28 says, “Suppose one of you wants to build a tower. Won't you first sit down and estimate the cost to see if you have enough money to complete it?” How do you think this verse might apply to this chapter on closing entries? Where do you see the connection between doing closing entries and whether a company should proceed with a business venture?

Answer 1

Well great connection by the way, didn't even expect that there is a connection between the Bible and accounts.

While passing closing entries you might have come across with profit and loss entries as well, this are the main things that matters and also the level of assets and liabilities. Will restrict our discussion to profit or loss.

Every entity while closing their books of accounts passed closing entries to transfer the profit or loss from income statement to the retained earnings, where one can see the future of the entity by comparing the past present trends of returns made by the entity. This can provide information sufficient to continue or close down the venture.