Journalizing and Posting Closing Entries Is a Required Step in the Accounting

question 77

Essay

Journalizing and posting closing entries is a required step in the accounting cycle. Explain why it is necessary to close the books at the end of an accounting period.

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Definitions:

Computation

The process of performing mathematical calculations or processing data to arrive at a result or conclusion.

Time Value

The concept that money available at the present time is more valuable than the same amount in the future due to its potential earning capacity.

Money

A medium of exchange that facilitates the transfer of goods and services.

Average Accounting Return

A financial ratio indicating the average profitability of investments, calculated as the average annual net income divided by the average book value.