What accounts are considered temporary? Describe the process to close these temporary accounts. Please list the steps in the accounting cycle and describe the importance of each step. What is liquidity? What is solvency? How are these evaluated in a business?
- What accounts are considered temporary? Describe the process to close these temporary accounts.
- Please list the steps in the accounting cycle and describe the importance of each step.
- What is liquidity? What is solvency? How are these evaluated in a business?
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Introduction:
Temporary accounts are accounts that are closed at the end of each period in accounting. General ledger entries are temporary accounts. All income statement accounts are classified as temporary. You must close temporary accounts to avoid mixing up account balances between accounting periods. A temporary account has a zero balance at the beginning of each fiscal year. Its ending balance is transferred to another account at the end of the fiscal year, ready to be used again in the current financial year to accumulate a new set of transactions.
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