Final answer:
If closing entries are not made, financial statements would be inaccurate because income and expenses from the past would carry into the new period. While the trial balance itself would still balance, the accounts would retain their balances indefinitely, potentially causing issues in financial reporting. Legal consequences are not a direct result of not making closing entries, but inaccuracies in reporting could lead to complications.
Step-by-step explanation:
If a company failed to make closing entries at the end of the year, the most immediate consequence is that a) the financial statements would be inaccurate. Without closing entries, revenues and expenses would not be properly transferred to the Income Summary and Retained Earnings accounts, resulting in income statement accounts reflecting the previous period's balances. Consequently, the reported net income or loss for the year would not be accurate.
Choice b) the trial balance would not balance is incorrect because the trial balance is a list of all accounts and their balances before closing entries are made. Closing entries do not affect the trial balance's ability to balance; rather, they affect the accounts' ending balances carried forward into the new accounting period.
Choice c) the accounts would remain open indefinitely is partially correct. If closing entries are not performed, then revenue, expense, and dividend accounts would indeed retain their balances and not zero out, resulting in an inaccurate reflection of these accounts going forward. Point d) the company would face legal consequences is not typically a direct result of failing to make closing entries, but there could be indirect consequences, such as penalties for misstated financial statements if this caused a company to report incorrect information to stakeholders or regulatory bodies.