Which of the following best describes the purpose of closing entries in accounting?

The purpose of closing entries in accounting is primarily to transfer the balances of temporary accounts, particularly revenues and expenses, to the permanent owner's equity account, which is reflected in the retained earnings or capital account. By doing this, it resets the balances of the temporary accounts to zero at the end of an accounting period. This process ensures that revenue and expense accounts start fresh for the new accounting period, allowing for a clearer understanding of income and expenses specifically related to that period.

This approach not only helps in preparing the financial statements for the next period but also maintains an accurate record of owner's equity that reflects the accumulated earnings retained in the business. Closing entries are a crucial step in the accounting cycle, and their accurate execution is essential for the integrity of financial reporting.