Which account would have a zero balance at the beginning of a new accounting period?

Which account would have a zero balance at the beginning of a new accounting period?

• A. Accounts receivable
• B. Revenue
• C. Long-term loan payable
• D. Cash

Answer: (B)

Revenues are a temporary (nominal) account that only accumulates during the period. At the end of the period, the total revenue is closed out to equity (typically to Retained Earnings), which zeroes out the Revenue account for the new period. That’s why, at the beginning of a new accounting period, Revenue starts with a zero balance. Permanent accounts like Cash, Accounts Receivable, and Long-term Loan Payable carry their ending balances into the next period. They don’t get closed to zero, so they can have nonzero balances when the new period begins.

Revenues are a temporary (nominal) account that only accumulates during the period. At the end of the period, the total revenue is closed out to equity (typically to Retained Earnings), which zeroes out the Revenue account for the new period. That’s why, at the beginning of a new accounting period, Revenue starts with a zero balance.

Permanent accounts like Cash, Accounts Receivable, and Long-term Loan Payable carry their ending balances into the next period. They don’t get closed to zero, so they can have nonzero balances when the new period begins.