The entries that transfer the revenue, expense, and withdrawals balances to the Owner, Capital account to prepare the company's books for the next period are called ________.

Question

BlackTom AI · Accepted Answer

Closing entries transfer the balances of temporary accounts (revenues, expenses, and owner withdrawals/drawings) into the owner’s capital account so the business can begin the next accounting period with those temporary accounts at zero.

1) Relevant knowledge points and concepts
- Temporary (nominal) accounts: revenue, expense, and withdrawals/drawings accounts accumulate activity for one period and must be cleared at period end.  
- Permanent (real) accounts: asset, liability, and owner’s capital accounts carry forward their balances to the next period.  
- Closing entries: journal entries made at period end to zero out temporary accounts and update Owner, Capital (or Retained Earnings for corporations).  
- Adjusting entries: separate entries made to record accruals and deferrals before financial statements are prepared.  
- Opening entries: entries made at the start of an entity or period to record beginning balances (not used to clear temporary accounts).

2) Step‑by‑step reasoning process
- Identify which accounts are temporary: revenues, expenses, withdrawals.  
- To prepare for the next period you must remove their balances from the ledger and transfer net effect to equity (Owner, Capital).  
- Closing entries accomplish this transfer; they are the specific entries designed for that purpose.

3) Example journal entry sequence (intermediate steps)
- Close revenues to Income Summary (or directly to Capital): Debit Revenues, Credit Income Summary.  
- Close expenses to Income Summary: Debit Income Summary, Credit Expenses.  
- Close Income Summary (net income or loss) to Owner, Capital: if net income, Debit Income Summary, Credit Owner, Capital. If net loss, reverse.  
- Close withdrawals/drawings to Owner, Capital: Debit Owner, Capital, Credit Drawings.

4) Why the correct answer is correct
- These described entries exactly match the definition of closing entries: they transfer revenue, expense, and withdrawals balances to Owner, Capital so temporary accounts start the next period at zero.

5) Why the other options are incorrect
- b. Opening entries: used to record beginning balances, not to transfer or clear period‑end temporary balances.  
- c. Adjusting entries: used to allocate revenues/expenses to the proper period (accruals/deferrals), not to transfer balances to capital.  
- d. Temporary accounts: this is a category of accounts (revenues/expenses/drawings), not the name of the entries that transfer those balances.

6) Conclusion
The entries described are closing entries, so the correct choice is a. closing entries, which matches the provided answer.

The entries that transfer the revenue, expense, and withdrawals balances to the Owner, Capital account to prepare the company's books for the next period are called ________.Single choice

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