Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 45 - No. 4)
What is the purpose of closing entries at the end of an accounting period?
To prepare the trial balance
To transfer temporary account balances to retained earnings
To record all cash transactions
To create the statement of financial position
Explanation
Closing entries transfer temporary account balances (revenues, expenses, and dividends) to the Retained Earnings account, which is a permanent equity account.
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