Practice question · True or false
The closing entry transfers the net profit or loss into the retained earnings account.
Hints
- The temporary balances have to go somewhere permanent.
- The destination accumulates the firm's lifetime profits.
Show the answer
True
Why
Closing sweeps all temporary balances into retained earnings, the permanent equity account that accumulates the firm's lifetime profit history. Next period starts from zero revenue and zero expense.
Practise The Accounting Cycle
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