Which process uses journal entries to prepare temporary accounts for a new fiscal period?

Which process uses journal entries to prepare temporary accounts for a new fiscal period?

• A. Trial Balance
• B. Worksheet
• C. Post-closing trial balance
• D. Closing entries

Answer: (D)

Closing entries are the step that resets temporary accounts for a new period. Revenue, expense, and drawing (or dividend) accounts are used to capture activity for one fiscal period and should start at zero in the next period. By recording journal entries that transfer these balances into permanent accounts (typically Retained Earnings), you clear the temporary accounts and reflect the period’s net result in the equity account. Once this process is done, the accounts ready for the new period are the permanent ones, with temporary accounts reset to zero. Other options serve different purposes: a trial balance checks that debits equal credits at a point in time, a worksheet helps with adjusting entries and planning financial statements, and a post-closing trial balance appears after closings to ensure only permanent accounts carry balances.

Closing entries are the step that resets temporary accounts for a new period. Revenue, expense, and drawing (or dividend) accounts are used to capture activity for one fiscal period and should start at zero in the next period. By recording journal entries that transfer these balances into permanent accounts (typically Retained Earnings), you clear the temporary accounts and reflect the period’s net result in the equity account. Once this process is done, the accounts ready for the new period are the permanent ones, with temporary accounts reset to zero. Other options serve different purposes: a trial balance checks that debits equal credits at a point in time, a worksheet helps with adjusting entries and planning financial statements, and a post-closing trial balance appears after closings to ensure only permanent accounts carry balances.