Which of the Following Statements Best Describes the Purpose of Closing

question 43

Multiple Choice

Which of the following statements best describes the purpose of closing entries?

• A) To faciliate posting and taking a trial balance.
• B) To determine the amount of net income or net loss for the period.
• C) To reduce the balances of temporary accounts to zero so that they may be used to accumulate the revenues, expenses and dividends of the next period.
• D) To complete the record of various transactions that were started in a prior period.

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Definitions:

Gross Profit

The difference between the revenue generated from sales and the cost of goods sold, before accounting for operating expenses.

Purchases Returns And Allowances

From the buyer’s perspective, returned merchandise or an adjustment for defective merchandise.

Periodic Inventory System

An inventory valuation method where inventory and cost of goods sold are determined at set periods, not after each transaction.

Price Adjustments

Changes made to the selling price of goods or services in response to market conditions, cost changes, or errors in the original pricing.