Closing the Temporary Accounts at the End of Each Accounting

question 7

Multiple Choice

Closing the temporary accounts at the end of each accounting period does all of the following except:

• A) Serves to transfer the effects of these accounts to the owner's capital account on the balance sheet.
• B) Prepares the withdrawals account for use in the next period.
• C) Causes owner's capital to reflect increases from revenues and decreases from expenses and withdrawals.
• D) Brings the revenue and expense accounts to zero balances.
• E) Has no effect on the owner's capital account.

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Definitions:

Default Risk Premium

The additional yield a lender demands to compensate for the risk that the borrower may default on the loan.

Liquidity Premium

Additional yield that investors demand for holding a security that is not easily traded or sold without a significant price reduction.

Maturity Risk Premium

The extra yield that investors demand to compensate for the risk of holding a bond until its maturity date.

T-bonds

Treasury bonds, long-term government debt securities with maturity periods typically over 20 years, offering interest payments semiannually.