Question

Closing entries involve closing out revenue and expense accounts to which permanent account?

O a. Owner's capital
Ob. Owner's drawing
c. Unearned revenue
Od. Accounts receivable

Answer 1

Closing entries involve closing out revenue and expense accounts to the permanent account called Owner's Capital . This results in transferring the net income (or net loss) of the business to the Owner's Capital account which is a permanent account in the balance sheet.

Therefore, the answer to the question "Closing entries involve closing out revenue and expense accounts to which permanent account?" is option (a) Owner's capital

Step-by-step explanation:

Answer 2

Closing entries transfer the balances of revenue and expense accounts to the Owner's Capital account. They are a step in the accounting cycle to prepare accounts for the next period by zeroing the temporary accounts.

Step-by-step explanation:

Closing entries involve closing out revenue and expense accounts to a specific permanent account. The correct answer is Owner's capital (Option a). At the end of the accounting period, revenues and expenses are closed to the Owner's Capital account in the case of a sole proprietorship, or to the Retained Earnings account for corporations. This is done to transfer the net income or loss for the period to the owner's equity section of the balance sheet. Unearned revenue and accounts receivable are not closed because they are balance sheet accounts that carry their balances into the next period. Owner's drawing is also not closed to revenue and expense accounts; it is a separate contra equity account that reflects withdrawals made by the owner.