Which of these accounts are zeroed out during the closing process at the end of a period?
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Answer: A. Nominal accounts
Explanation
Nominal accounts (revenue and expense accounts) are closed out to zero at the end of each accounting period. This resetting prepares temporary accounts to track activity for the next period. Their cumulative net balances transfer to retained earnings or capital. Accounting divides accounts into permanent balance sheet accounts and temporary nominal accounts. Nominal accounts measure performance over specific operational periods. Closing entries clear these balances annually.
Year-end closing processes ensure income statements start fresh each fiscal year. Failing to close nominal accounts would distort multi-year performance comparisons. Accountants execute these entries during the final closing phase. Balance sheet accounts represent permanent resources and liabilities carrying forward. Real accounts remain open continuously across accounting periods. Therefore, only nominal accounts are zeroed out at year-end.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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