The Closing Process Is Necessary in Order To

question 134

Multiple Choice

The closing process is necessary in order to:

• A) calculate net income or net loss for an accounting period.
• B) ensure that all permanent accounts are closed to zero at the end of each accounting period.
• C) ensure that the company complies with state laws.
• D) ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.
• E) ensure that management is aware of how well the company is operating.

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Definitions:

Balance Sheet

A report detailing a corporation's assets, liabilities, and equity of its shareholders at a certain moment.

Liquidity Problems

Situations where an entity faces difficulty in converting assets into cash or meeting its short-term obligations.

General Ledger

A comprehensive record of all financial transactions of a company, categorized into accounts.