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Why are revenue and expense accounts described as "temporary" accounts?
AThey never appear on any financial statement
BThey are only used by temporary or seasonal staff
CTheir balances are reset to zero at the end of each period
DThey carry their balances forward into the next period
Answer & Solution
Correct answer: C. Their balances are reset to zero at the end of each period
1. Temporary accounts record operational transactions for a specific period.
2. After the statement of profit or loss is prepared, their balances are set back to zero by transferring them out.
3. The next period therefore begins with zero balances for a fresh start.
4. Carrying balances forward (D) describes permanent accounts; A is correct.
5. They do appear on the statement of profit or loss, ruling out C, and the name is unrelated to staffing (B).
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.3 "Temporary Accounts", p.24_
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