Closing entries reset the balance in retained earnings to zero. (True or False)

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Expert Solution

FALSE

At the end of financial Year, the revenue, expenses and dividend account balance must be zero so that they can begin to accumulated amounts to the new financial year. To accomplish this, temporary accounts are closed to zero by passing closing journal entries. Closing Entries transfer each revenue, expenses and dividend account balance into retain earning account.

Balance Sheet Accounts are permanent account because they have continue balance from one financial year to next financial year . Retain Earning account is belongs to balance sheet accounts . Hence it is permanent account . Closing entries journalized for only temporary accounts for resetting balance of temporary account to zero. The Closing process transfer temporary account balance into a permanent account , namely Retain Earning Account . Hence the given statement is False, Closing entries does not reset retain earning account to zero.

ekkarill92 answered 1 year ago

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