Question

What do closing entries accomplish?

1) Zero out revenues, expenses, Owner, Withdrawals
2) Transfer revenues, expenses, Owner, Withdrawals to the Owner, Capital Account
3) Brings the Owner, Capital account to its correct balance
4) All of the above

Answer 1

Closing entries are used to zero out temporary accounts, transfer their balances to the Owner's Capital Account, and ensure it reflects the correct balance — making the answer 'All of the above'.

Step-by-step explanation:

Closing entries serve multiple purposes in the accounting cycle. Firstly, they zero out the temporary accounts which are revenues, expenses, and owner's withdrawals, to prepare the accounts for the next accounting period. Secondly, they transfer the balances of these accounts to the Owner's Capital Account, which is a permanent equity account on the balance sheet. Lastly, by doing these two steps, closing entries ensure that the Owner's Capital Account reflects the correct balance that has changed as a result of the business's operations during the period.

Therefore, the accurate answer to the student's question is 4) All of the above, as closing entries accomplish zeroing out the accounts, transferring balances, and bringing the Owner's Capital account to its correct balance.