Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 3 - The Accounting Information System - Questions - Page 133: 12

Answer

After preparation of adjusting entries and financial statements have been prepared, closing entries are created to transfer nominal account balances to retained earnings (capital) .

Work Step by Step

Closing entries are important because they reduce nominal account balances to 0, therefore preparing for the transactions of the next period.
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