After closing entries, which accounts still have balances?

• A. Only temporary accounts.
• B. Only permanent accounts.
• C. Both temporary and permanent.
• D. None.

Answer: (B)

Closing entries reset accounts that relate to operations for the period. Temporary accounts, like revenues, expenses, and withdrawals (or dividends), are closed to zero by transferring their balances to a permanent equity account (typically Retained Earnings). Permanent accounts—assets, liabilities, and owner’s equity—are not closed and keep their ending balances into the next period. Therefore, after closing, only permanent accounts have balances. For example, net income increases Retained Earnings, while Revenue, Expenses, and Withdrawals end with zero.