Final answer:
Closing entries are prepared to clear temporary accounts to zero, are made at the end of the accounting period, and to update the Capital balance. Therefore, the correct answer is d. All of the above are correct.
Step-by-step explanation:
Closing entries are prepared for various reasons in accounting. They are done to clear all temporary accounts to zero so that they do not carry their balances into the next period. This practice occurs at the end of the accounting period with the goal of resetting the income statement accounts to zero and getting ready for the next period's transactions.
At the same time, closing entries aid in the process to update the Capital balance, ensuring that the changes from revenues, expenses, gains, and losses are appropriately reflected in the owner’s equity.
Therefore, the answer to the question is that All of the above are correct. This means that closing entries serve all these purposes: they clear temporary accounts, are done at the close of an accounting period, and update the capital balance to reflect the financial activity of the period.