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In the complete accounting cycle, closing entries are journalised and posted at which stage relative to the financial statements?
ABefore the financial statements have been prepared
BBefore the adjusting entries are journalised
CAfter the financial statements have been prepared
DDuring the daily posting of routine transactions
Answer & Solution
Correct answer: C. After the financial statements have been prepared
1. The cycle orders adjusting entries before the statements and closing entries after them.
2. Steps 5 to 7 are the statements; steps 8 and 9 are the closing entries.
3. Closing therefore comes after the statements, so C is correct.
4. Adjusting (not closing) precedes the statements, ruling out A; B and D misplace closing entirely.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.2.2 "Complete Accounting Cycle", p.55_