Final answer:
The statement that closing entries deal primarily with balance sheet accounts is B. false. Closing entries are in fact associated with temporary accounts such as revenues, expenses, and dividends, and not primarily with balance sheet accounts.
Step-by-step explanation:
Closing entries are used in accounting to close out temporary accounts, such as revenues, expenses, and dividends, and transfer their balances into permanent accounts on the balance sheet. At the end of an accounting period, closing entries transfer the balances from these temporary accounts to a permanent equity account, often called retained earnings.
Temporary accounts are zeroed out or closed because they track financial results for a specific period, whereas the balance sheet reflects the financial position of a company at a point in time and includes accounts that are carried over into future periods, such as assets, liabilities, and equity.
The balance sheet, or statement of financial position, is an important financial statement that uses a T-account structure to list a firm's assets and liabilities. Assets are on one side, and liabilities plus net worth (equity) are on the other, where total assets always equal liabilities plus net worth.
The role of banks illustrates this concept as they use balance sheets to showcase their financial health. In particular, a bank's assets include loans and reserves, while liabilities consist of deposits from customers. Net worth is calculated by subtracting liabilities from assets and is included on the liabilities side to ensure that the account balances.