At period end, what happens to temporary accounts?

• A. Closed into permanent accounts.
• B. Carried forward to the next period with their balances.
• C. Converted into cash.
• D. Closed to zero to prepare for the next period.

Answer: (D)

Temporary accounts—such as revenues and expenses—are closed at period end to reset them to zero for the next period. This closing transfers the period’s net result to a permanent equity account (typically retained earnings or owner's capital), so the books start fresh each new period with zero balances in the revenue and expense accounts. This avoids mixing the current period’s performance with the next period’s activity and keeps permanent accounts to carry forward their balances. The other options would either keep old balances into the new period, convert balances to cash (which isn’t how closing works), or skip the closing step entirely, which would prevent a proper reset for the new period.