Closing Entries Are Made

question 183

Multiple Choice

Closing entries are made

• A) in order to terminate the business as an operating entity.
• B) so that all assets liabilities and owner's capital accounts will have zero balances when the next accounting period starts.
• C) in order to transfer net income (or loss) and owner's drawings to the owner's capital account.
• D) so that financial statements can be prepared.

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Definitions:

Cost of Goods Manufactured

The total production cost of goods completed during a specific period, including labor, materials, and overhead costs.

Cost of Goods Sold

The straight-out costs connected to generating the products a company sells, involving materials and labor force.

Selling and Administrative Expenses

the combined total of all costs associated with selling a company’s products and managing the company, excluding direct costs of producing goods or services.

Period Costs

Expenses that are not directly tied to product production and are recorded as expenses in the period in which they are incurred, such as selling and administrative expenses.