The Purpose of Making Closing Entries Is To

question 47

Multiple Choice

The purpose of making closing entries is to:

• A)Prepare revenue and expense accounts for the recording of the next period's revenue and expenses.
• B)Enable the accountant to transfer the balances from all permanent accounts to the Income Summary account.
• C)Establish new balances in the balance sheet accounts.
• D)Reduce the number of expense accounts.

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Definitions:

Expected Price Level

The anticipated average of prices for all goods and services in an economy over a future period.

Labor Contracts

Agreements between employers and employees or unions that define terms of employment, salaries, benefits, and working conditions.

Short-run Phillips Curve

A graphical representation showing the inverse relationship between unemployment rates and inflation rates in the short-term.

Per-capita Income

The average income earned per person in a certain area, calculated by dividing the area's total income by its total population.