Closing Entries Are Prepared

question 43

Multiple Choice

Closing entries are prepared:

• A) to clear all temporary accounts to zero.
• B) to update the Capital balance.
• C) at the end of the accounting period.
• D) All of the above are correct.

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Definitions:

Capital Lease Obligation

A lease classified as a purchase agreement for accounting purposes, wherein the lessee records the leased asset as an owned asset on the balance sheet.

Capital Lease

A lease agreement that transfers substantially all the risks and rewards of ownership of the asset to the lessee, effectively treated as a purchase of the asset.

Periodic Cash Payments

Payments made regularly over a period of time, such as dividends or loan repayments.

Lease Rental Expense

An expense incurred from leasing an asset, which is typically recorded on a lessee's income statement.