Question

True or false: the balances on asset and liability accounts are carried down at the end of a reporting period to be brought forward to the next reporting period.

Answer 1

False. Balances on asset and liability accounts are closed out at the end of a reporting period and not carried forward.

Step-by-step explanation:

False. The balances on asset and liability accounts are not carried down at the end of a reporting period to be brought forward to the next reporting period. Instead, the balances are closed out, and the net income or loss is transferred to the owner's equity or retained earnings account.

This process is known as closing the books. At the start of the next reporting period, new balances are recorded, and the process begins again.