An Important Purpose of Closing Entries Is to

question 98

Multiple Choice

An important purpose of closing entries is to

• A) help in preparing financial statements.
• B) set real account balances to zero to begin the next period.
• C) set nominal account balances to zero to begin the next period.
• D) adjust the accounts in the ledger.

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Definitions:

Personal Income

The total amount of income earned by individuals, including wages, salaries, investments, and other sources before taxes.

Excise Tax

A tax applied to specific goods, services, or activities, often with the intention of reducing consumptions, such as taxes on tobacco or alcohol.

Tax Incidence

The study of who ultimately bears the economic burden of a tax, whether producers or consumers.

Inelastic Demand

A situation where the demand for a product does not significantly change with a change in its price.