Question

Which of the following statements is correct?

1. A post-closing trial balance should be prepared before adjusting entries are posted to the ledger accounts.

2. The purpose of the post-closing trial balance is to prove the equality of the income statement account balances that are carried forward into the next accounting period.

3. The balances that appear on the post-closing trial balance will match the balance sheet account balances after closing entries.

4. A post-closing trial balance will show the amount of net income (or loss) for the period.

5. A post-closing trial balance will show zero balances for balance sheet accounts.

Answer 1

The correct statement is that the balances on the post-closing trial balance will match balance sheet account balances after closing entries. The post-closing trial balance is used to ensure all temporary accounts have been properly closed and does not include income statement accounts or display net income.

Step-by-step explanation:

The correct statement is: 3. The balances that appear on the post-closing trial balance will match the balance sheet account balances after closing entries. A post-closing trial balance is prepared after all adjusting and closing entries have been posted, and its main purpose is to verify that all temporary accounts have been closed properly and that the ledger is in balance for the start of the next accounting period. It includes only balance sheet accounts, which carry their balances into the new accounting period.

Statement 2 is incorrect because the post-closing trial balance does not include income statement accounts as those are temporary accounts that have been closed to Retained Earnings. Statement 4 is incorrect because the post-closing trial balance does not show net income or loss; rather, this information is found on the income statement. Lastly, statement 5 is incorrect as the post-closing trial balance will not show zero balances for balance sheet accounts, but it will show zero balances for income statement and dividend accounts since they are closed out to Retained Earnings.