The Purpose of Closing the Books Is to Transfer

question 15

Multiple Choice

The purpose of closing the books is to transfer:

• A)Drawing to Sales.
• B)Cost of Goods Sold to Accounts Payable.
• C)Checking to Accounts Receivable.
• D)Net income to Retained Earnings
• E)None.

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Definitions:

STRIPS

Separate Trading of Registered Interest and Principal Securities, a type of U.S. government security that allows the separate trading of interest and principal components.

Treasury Notes

Intermediate-term U.S. government debt security with a maturity of 1 to 10 years and pays interest every six months.

Maturity at Issue

The predetermined date when a financial instrument, such as a bond, will come due and the principal is to be paid back to investors.

Default Risk

The potential risk that an issuer of a bond or other debt security will be unable to make principal and interest payments when due.