Closing Entries Are Prepared for Which of the Following Reasons

question 130

Multiple Choice

Closing entries are prepared for which of the following reasons?

• A)To get the accounts ready for the next accounting period
• B)To get the worksheet ready for the next accounting period
• C)To get the journal ready for the next accounting period
• D)To get the financial statements ready for the next accounting period

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Definitions:

Cost of Goods Sold

An expense representing the total cost of materials and labor directly associated with the production of goods sold by a business.

Merchandise Inventory

The goods a company intends to sell to customers that are considered current assets on the balance sheet.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting overheads, payroll, taxation, and interest payments.

Accounts Receivable

Represents money owed to a business by its customers for goods or services delivered on credit.