Answer:
A.Closing
Explanation:
These are called closing entries as a nominal account called income summary account is created to transfer the expenses and income from profit and loss account to balance sheet for closing the accounts.
Answer:
A) closing
Explanation:
Closing entries are carried out at the end of every accounting period in order to transfer the net profits or losses to the retained earnings account. All the accounts that are included in the balance sheet, revenues, expenses, profits or losses, must be closed to income summary account.
E.g.
Dr Income summary or Dr Revenues
Cr Expenses Cr Income summary
At the end, the income summary account will be closed to retained earnings account:
if profits were made: if losses were suffered:
Dr Income summary Dr Retained earnings
Cr Retained earnings Cr Income summary
Dividends are closed directly to retained earnings:
Dr Dividends closed to Dr Retained earnings
Cr Cash Cr Dividends
Temporary accounts must be closed in order to be able to start the new accounting period with 0 revenues and 0 expenses. Temporary accounts are not included in the balance sheet.
