Journalizing and Posting Closing Entries Is a Required Step in the Accounting

question 212

Essay

Journalizing and posting closing entries is a required step in the accounting cycle. Discuss why it is necessary to close the books at the end of an accounting period. If closing entries were not made how would the preparation of financial statements be affected?

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Definitions:

APC

Stands for Average Propensity to Consume, which is the fraction of income that households spend on consumption rather than saving.

APS

Automatic Payment System, a system allowing for automatic transfers of payments, often in financial contexts; the term can refer to multiple concepts depending on the context.

Savings

Money that is set aside from one's income or earnings for future use, often accumulating interest.

Saving

The portion of income that is not spent on immediate consumption but is set aside for future use, often in investments or deposits.