Temporary vs. Permanent Accounts – True or False

Practice Question

Intro to Financial Accounting
Adjustments and Quality of Earnings
Temporary vs. Permanent Accounts
True or False

Temporary accounts are reset to zero at the end of each accounting period.

Answer +
Final Answer: TRUE
Explanation +

Temporary accounts, such as revenues and expenses, are closed at the end of the accounting period, and their balances are transferred to the retained earnings account. This process ensures that they start with a zero balance in the next accounting period.