ANSWER

The closing entry process in accounting is a fundamental step in the preparation of financial statements at the end of an accounting period. It involves transferring the balances of various temporary accounts, including revenue and expense accounts, to the retained earnings or owner’s equity account. This process ensures that the financial statements reflect only the economic activity for a specific period, allowing for a fresh start in the next accounting period. When it comes to zeroing out the balance in an expense account, it’s essential to understand the nature of these accounts and how they are treated in the closing entry.

The question at hand is whether the closing entry to zero out the balance in an expense account includes a debit to that expense account. To answer this question, let’s explore the options:

A) “Is true only for non-cash expenses.”
B) “Depends on the nature of the expense account.”
C) “True.”
D) “False.”

Let’s break down each option and provide a comprehensive explanation:

A) “Is true only for non-cash expenses.”
This statement is not entirely accurate. Closing entries apply to all types of expenses, including both cash and non-cash expenses. The purpose of the closing entry is to reset the temporary accounts for the next accounting period, regardless of whether the expenses were incurred using cash or other means. Therefore, this option is not correct.

B) “Depends on the nature of the expense account.”
The nature of the expense account does indeed play a role in determining the specific accounts involved in the closing entry. Generally, expenses are closed by debiting the respective expense accounts and crediting an account called “Income Summary” or directly to the retained earnings account. This method ensures that the expenses are zeroed out, regardless of their nature. Therefore, while the nature of the expense account may influence the specific accounts used in the closing entry, the debit to the expense account is a common practice for all types of expenses. This option is partially correct.

C) “True.”
This option is the most accurate statement among the given choices. In the closing entry process, it is true that to zero out the balance in an expense account, a debit is made to that expense account. This debit entry is necessary to reduce the balance of the expense account to zero, reflecting that all expenses for the period have been recognized and accounted for. Therefore, this option is correct.

D) “False.”
This option is incorrect. As explained in option C, it is indeed true that a closing entry to zero out the balance in an expense account includes a debit to that expense account.

In conclusion, the correct answer to the question is option C: “True.” When closing expense accounts, a debit entry is made to ensure that their balances are reset to zero, regardless of whether the expenses are cash or non-cash in nature. Understanding the closing entry process is crucial for maintaining accurate financial records and preparing reliable financial statements for decision-making and compliance purposes.