Question

Closing entries are made:

a. in order to terminate the business as an operating entity.
b. so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts.
c. in order to transfer net income (or loss) and owner's drawings to the owner's capital account.
d. so that financial statements can be prepared

Answer 1

c. in order to transfer net income (or loss) and owner's drawings to the owner's capital account.

Step-by-step explanation:

Closing entries: The closing entries are the entries in which the four types of accounts are closed i.e revenue accounts, expenses account, income summary account, and the dividend account.

After passing the closing entries, the net income is transfer to the owner's capital. The adjustment of the net income in the shareholder equity is that it is added to the beginning retained earnings balance.

Therefore, the option c. is correct