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17 July, 04:31

Closing entries are necessary for Question 11 options: a. permanent accounts only. b. temporary accounts only. c. both permanent and temporary accounts. d. permanent or real accounts only.

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  1. 17 July, 04:52
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    The correct answer is b. temporary accounts only.

    Explanation:

    The accounting closing is the process that consists in canceling the income statements (made up of the income, expenses, sales and production costs accounts) and transferring said figures to the respective balance accounts (assets, liabilities and equity). This closure allows to know the economic result of the period and quantify the gains or losses.

    The result of closing the income statements must be included in the equity account. This means that if the results are positive (profits), the equity account increases, while if the results are negative (losses), the account decreases.

    To cancel or close the income statements, it is necessary to make adjustments (depreciation of fixed assets, amortization of intangible assets, etc.) and reconciliations (of bank accounts).

    In summary, the accounting closing implies, as a first step, the regularization of the expense and income accounts to obtain the result of the year. This lets you know how much you have earned or lost in the period. Then you must regularize the equity accounts (if it increased or decreased according to the gains or losses) and, finally, close all accounts with balance so that it is equal to zero.
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