Closing Entries Basics Quiz
Three easy multiple-choice questions testing core concepts and purpose of closing entries in accounting.
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Quiz Questions & Answers
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Question 1: What is the primary purpose of closing entries at period end?
To adjust long-term asset valuations for depreciation
To finalize cash receipts and payments for audit trails
To transfer temporary account balances to retained earnings so next period starts fresh
Question 2: Which account type is NOT closed during the closing process?
Expense accounts like rent and salaries
Revenue accounts reporting current period sales
Permanent balance sheet accounts like Cash and Equipment
Question 3: Why are closing entries important?
They ensure continuity of balances into the next period
They eliminate the need for ledgers
They record only cash transactions