An Important Purpose of Closing Entries Is to

question 230

Multiple Choice

An important purpose of closing entries is to

• A) update the nominal accounts at year end.
• B) set permanent account balances to zero to begin the next period.
• C) help achieve the goals of the matching principle.
• D) transfer net income or loss to Retained Earnings.

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Definitions:

Bankruptcy

A legal process for individuals or businesses that are unable to repay their outstanding debts, allowing for the distribution of assets to creditors, potentially leading to the discharge of remaining debts.

Agency Termination

The process of ending the relationship between an agent and their principal, which can occur for various reasons such as fulfillment of the agency purpose or mutual agreement.

Principal and Third Party

Legal terms describing the major participant in a transaction (principal) and an outsider who has a lesser role (third party).

Agency Contract

A legal agreement wherein one party, the agent, agrees to act on behalf of another party, the principal, in business transactions.