Closing Entries

question 7

Multiple Choice

Closing entries:

• A)are prepared before financial statements are prepared.
• B)reduce the number of permanent accounts.
• C)cause the revenue and expense accounts to have zero balances.
• D)summarize the activity in every account.

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Definitions:

Adjusting Journal Entries

Journal entries made in an accounting period to allocate revenue and expenses to the period in which they actually occurred.

Closing Journal Entries

Entries made at the end of an accounting period to transfer temporary account balances to permanent accounts and prepare for the next period.

Revenue In Advance

Income received by a company for goods or services that are to be provided in the future, also known as deferred revenue.

Liability Account

An account on the balance sheet representing amounts owed to creditors or other parties, typically categorized as current or long-term.