Question

Is it necessary to post the closing entries to the ledger accounts?

1) Yes, because it ensures that all revenue and expense accounts are properly closed for the accounting period.
2) No, because new revenue and expense accounts will be opened in the subsequent accounting period.
3) Cannot be determined
4) Not applicable

Answer 1

Closing entries are necessary to ensure that all revenue and expense accounts are properly closed for the accounting period.

Step-by-step explanation:

The correct answer is option 1) Yes, because it ensures that all revenue and expense accounts are properly closed for the accounting period. Closing entries are journal entries made at the end of an accounting period to close out the temporary accounts, such as revenue and expense accounts, and transfer their balances to the permanent accounts, such as retained earnings. This allows for accurate reporting of the financial results for the specific accounting period. Without closing entries, these temporary accounts would carry forward their balances into the next period, leading to incorrect financial statements.

Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts, such as revenues and expenses, to permanent accounts like Retained Earnings. This process resets the balances of the revenue and expense accounts to zero, preparing them for the next accounting period. Without posting closing entries, the company's financial statements would not accurately reflect the results of operations for the period, nor would they be able to start the new period with a clean slate.