Why are merchandising accounts closed?
Understand the Problem
The question is asking about the concept and rationale behind closing merchandising accounts, specifically in accounting and finance. It seeks to understand why this practice is conducted at the end of an accounting period.
Answer
To set the temporary accounts to zero.
The final answer is to set the temporary accounts to zero.
Answer for screen readers
The final answer is to set the temporary accounts to zero.
More Information
Merchandising accounts are closed at the end of an accounting period to ensure that the temporary accounts do not carry over their balances to the next period. This involves resetting these accounts to zero, enabling accurate tracking of income and expenses for each new period.
Tips
A common mistake is confusing temporary accounts with permanent accounts. Temporary accounts accumulate data for one accounting period and are then closed; permanent accounts, however, carry their balances forward into future periods.
