Question

In the closing process, ___ are zeroed out by crediting each account and ___ are zeroed out by debiting each account. expenses and dividends; revenues revenues; expenses and dividends dividends; revenues and expenses assets; liabilities

Answer 1

In the closing process, expenses and dividends are zeroed out by crediting each account, and revenues are zeroed out by debiting each account, to transfer these temporary account balances to permanent equity accounts like Retained Earnings.

Step-by-step explanation:

In the closing process, expenses and dividends are zeroed out by crediting each account and revenues are zeroed out by debiting each account. At the end of an accounting period, companies go through the closing process to prepare their accounts for the next period. This involves zeroing out temporary accounts, including revenues, expenses, and dividends, to begin the next accounting period with a clean slate. The aim is to transfer the balances of these accounts to permanent equity accounts, such as Retained Earnings.

The T-account is a useful visual aid in accounting to display the balance of different accounts, separating a firm's assets on the left from its liabilities on the right, with net worth or bank capital included in liabilities to help balance the account. For banks, assets might include reserves, loans, and securities, while liabilities could be deposits and equity. The equality of a bank's assets and liabilities plus net worth maintains the fundamental accounting equation.