Question

question 1 (1 point)
what is the primary purpose of closing entries?
to record transactions that occurred during the accounting period
to prepare all temporary accounts for the next accounting period
to adjust all accounts to their correct balances
to prepare the financial statements

Explanation:

• The first option is incorrect because recording transactions during the accounting period is done through regular journal entries, not closing entries.
• The second option is correct. Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (revenues, expenses, dividends) to permanent accounts, thereby resetting the temporary accounts to zero for the next accounting period.
• The third option is incorrect as adjusting accounts to their correct balances is the purpose of adjusting entries, not closing entries.
• The fourth option is incorrect because preparing financial statements involves using the adjusted trial balance (after adjusting entries), and closing entries come after financial statement preparation in the accounting cycle.

Answer:

B. To prepare all temporary accounts for the next accounting period