Final Answer:
The closing process transfers net income to the retained earnings account, ensuring accurate financial records and preparing temporary accounts for the next accounting period.
Step-by-step explanation:
Once a company determines its net income, the closing process is initiated to reset temporary accounts and prepare for the next accounting period.
In this crucial step, net income is moved from revenue and expense accounts to the retained earnings account.
The purpose of this transfer is to accurately reflect the company's accumulated profits over time.
The closing process is integral to maintaining accurate financial records. By closing temporary accounts, the company ensures that each accounting period starts with a clean slate, facilitating a clear evaluation of its financial performance. This systematic approach aids in decision-making, financial analysis, and compliance with accounting standards.