Question

Closing entries A. clear revenue and expense accounts to zero so that these accounts may begin...

Closing entries

A. clear revenue and expense accounts to zero so that these accounts may begin accumulating the components of net income for the next accounting period.

B. summarize a period’s revenues and expenses by transferring the balances of revenue and expense accounts to the Income Summary account, the balance of which is transferred to the Capital account.

C. Both a and b

D. Neither a nor b

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Answer #1

B.summarize a period’s revenues and expenses by transferring the balances of revenue and expense accounts to the Income Summary account, the balance of which is transferred to the Capital account.

Explanation: The balances of revenue and expenses of a period are transferred to income statement at the end of an accounting period , so that business result is calculated in the form of net income. Once the balances are transferred, they will have zero balances at the start of next accounting period.

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