Final Answer:
Closing entries aim to reset temporary accounts, specifically revenue and expense accounts, to zero at the end of an accounting period.Thus option c is the correct option.
Step-by-step explanation:
Closing entries serve the crucial purpose of resetting temporary accounts, namely revenue and expense accounts, to zero at the end of an accounting period. This process aids in providing an accurate snapshot of a company's financial position and performance over a specific timeframe. To comprehend this, let's delve into the rationale behind closing entries.
At the end of an accounting period, revenue accounts, which encompass sales and other income streams, are closed to prepare for the upcoming period. Simultaneously, expense accounts, representing various costs incurred during the same period, are closed. The net result is the determination of the net income or net loss for the period. Mathematically, this involves subtracting total expenses from total revenues:
[ text{Net Income (or Loss)} = Sigma text{Revenue} - Sigmatext{Expense} ]
Closing these accounts to zero signifies a fresh start for the next accounting period, preventing the overlap of transactions and ensuring financial statements accurately reflect the current period's performance.
In conclusion, the closing entries ensure that a company's financial records are in sync with its operational reality. By resetting revenue and expense accounts to zero, businesses can present stakeholders with a clear and updated financial picture, facilitating sound decision-making based on accurate, current data.
Therefore option c is the correct option.