End-of-year balances in the revenue accounts will become the beginning balances of the next year.

• A. True
• B. False
• C. Not sure
• D. Depends

Answer: (A)

Revenue accounts are temporary accounts used to track income for a specific period. At year-end, these accounts are closed, bringing their balances to zero. The closing entries transfer the revenue totals to Income Summary and then to Retained Earnings, so the next year starts with zero balances in revenue (and expense) accounts. Only the permanent accounts, like assets, liabilities, and equity (Retained Earnings), carry forward their balances. Therefore, the statement is not correct—the ending balances in revenue accounts do not become the starting balances for the next year; they are reset as part of the closing process.