At the end of an accounting period, the balance of an expense account is normally transferred to which account?
Correct answer: C. The Trading or Profit and Loss Account
- A. The Statement of Financial Position
- B. The Cash Book only
- C. The Trading or Profit and Loss Account
- D. The Capital Account directly
Explanation
Expense accounts are nominal accounts, and their balances are transferred to the relevant income statement account. They are not normally carried forward as separate balances to the next accounting period.
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About Ledger Accounts and the Trial Balance
Ledger accounts collect transactions under individual headings and use debit and credit sides to determine balances. The trial balance lists those balances to check arithmetical agreement before financial statements are prepared, but it does not reveal every error, such as complete omission, compensating errors or entries made in the wrong account.
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