Which of the following is a characteristic of a permanent account?

• A. It is closed at the end of each accounting period.
• B. It includes accounts such as revenues and expenses.
• C. It always has a zero balance at the start of a new period.
• D. Its balance is carried forward to the next accounting period.

Answer: (D)

Verified step by step guidance

1. Understand the concept of permanent accounts: Permanent accounts are those that are not closed at the end of an accounting period. Their balances are carried forward to the next period.
2. Differentiate between permanent and temporary accounts: Temporary accounts, such as revenues, expenses, and dividends, are closed at the end of each accounting period, while permanent accounts, such as assets, liabilities, and equity, remain open.
3. Identify examples of permanent accounts: Examples include accounts like Cash, Accounts Receivable, Accounts Payable, and Retained Earnings. These accounts reflect ongoing financial positions and are not reset to zero.
4. Recognize the key characteristic of permanent accounts: The defining feature is that their balances are carried forward to the next accounting period, unlike temporary accounts which are closed to zero.
5. Apply this understanding to the question: The correct answer is the statement that aligns with the characteristic of permanent accounts, which is 'Its balance is carried forward to the next accounting period.'