Which of the following is true regarding closing entries?
Correct answer: B. They must be made after the adjusting entries but before the reversing entries
- A. They must be followed by reversing entries
- B. They must be made after the adjusting entries but before the reversing entries
- C. They must be made after the reversing entries but before the adjusting entries
- D. They transfer the balances in all of the Nominal Accounts to the Trading and Profit and Loss Account
Explanation
Closing entries transfer nominal account balances to Trading and Profit and Loss Account after adjustments have been recorded. Reversing entries, if used, are normally passed in the next accounting period.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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