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What kind of accounts are typically not balanced but closed by transferring to the Profit and Loss Account?
- a)Personal accounts.
- b)Real accounts.
- c)Nominal accounts.
- d)Cash accounts.
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
What kind of accounts are typically not balanced but closed by transfe...
Explanation:
Nominal Accounts:
Nominal accounts are those accounts that are related to revenues, expenses, gains, and losses. These accounts are not typically balanced like personal or real accounts. Instead, they are closed at the end of the accounting period by transferring their balances to the Profit and Loss Account.
Closing Process:
At the end of the accounting period, nominal accounts are closed by transferring their balances to the Profit and Loss Account. This process helps in determining the net income or net loss for the period.
Example:
For example, revenue accounts such as sales, interest income, and expense accounts such as salaries, rent, utilities, etc., are nominal accounts that are closed at the end of the accounting period.
Finalizing the Accounts:
By closing the nominal accounts and transferring their balances to the Profit and Loss Account, the company can determine its overall financial performance for the period. This helps in assessing the profitability and efficiency of the business operations.
Conclusion:
In conclusion, nominal accounts are typically not balanced but closed by transferring their balances to the Profit and Loss Account at the end of the accounting period. This process helps in summarizing the financial results of the business and is an important step in the accounting cycle.
Nominal Accounts:
Nominal accounts are those accounts that are related to revenues, expenses, gains, and losses. These accounts are not typically balanced like personal or real accounts. Instead, they are closed at the end of the accounting period by transferring their balances to the Profit and Loss Account.
Closing Process:
At the end of the accounting period, nominal accounts are closed by transferring their balances to the Profit and Loss Account. This process helps in determining the net income or net loss for the period.
Example:
For example, revenue accounts such as sales, interest income, and expense accounts such as salaries, rent, utilities, etc., are nominal accounts that are closed at the end of the accounting period.
Finalizing the Accounts:
By closing the nominal accounts and transferring their balances to the Profit and Loss Account, the company can determine its overall financial performance for the period. This helps in assessing the profitability and efficiency of the business operations.
Conclusion:
In conclusion, nominal accounts are typically not balanced but closed by transferring their balances to the Profit and Loss Account at the end of the accounting period. This process helps in summarizing the financial results of the business and is an important step in the accounting cycle.
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What kind of accounts are typically not balanced but closed by transfe...
Nominal accounts, which include expenses and revenues, are usually not balanced. Instead, they are closed at the end of the accounting period by transferring their balances to the Profit and Loss Account.
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What kind of accounts are typically not balanced but closed by transferring to the Profit and Loss Account?a)Personal accounts.b)Real accounts.c)Nominal accounts.d)Cash accounts.Correct answer is option 'C'. Can you explain this answer?
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