Closing Entries Are Required

question 6

Multiple Choice

Closing entries are required:

• A) if management has decided to cease operating the business.
• B) only if the company adheres to the accrual method of accounting.
• C) if a company's bookkeeper forgets to prepare reversing entries.
• D) if the temporary accounts are to reflect correct amounts for each accounting period.
• E) in order to satisfy the Internal Revenue Service.

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Definitions:

Creditors

Individuals or institutions to whom money is owed by a person or organization.

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, thus having a residual claim on the corporation's assets after liabilities have been paid.

Articles Of Incorporation

The document filed with a governmental body to legally document the creation of a corporation.

Corporation

A legal entity that is separate and distinct from its owners, characterized by limited liability, perpetual succession, and ease of transferability of ownership interests.