Are permanent accounts closed at the end of the accounting year?

• A. Yes
• B. Sometimes
• C. No
• D. Never

Answer: (C)

Permanent accounts carry their balances forward from one period to the next. They include assets, liabilities, and equity accounts, and they reflect the ongoing financial position of the business. Because the closing process is meant to reset the balances of temporary accounts for a new period, it does not involve permanent accounts. Their ending balances become the beginning balances for the next year, which is why the balance sheet shows a carryover of these figures. In contrast, only temporary accounts—revenues, expenses, and dividends—are closed to retained earnings or capital to zero them out for the new period. This is why permanent accounts are not closed at year-end.