All accounts need to be closed in order to prepare them for the next period's transactions.

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In accounting, the closing process targets temporary or nominal accounts to reset them for the next period, while permanent accounts carry forward. 
Option 1: FALSE. Saying that all accounts must be closed to prepare for the next period is not accurate because permanent accounts (such as assets, liabilities, and equity) are not closed at period end; their balances roll forward into the next period. The closing process affects only revenue, expense, and drawing/distribution accounts, which are temporary and do get closed to a clearing figure (like retained earnings). 
Option 2: TRUE. This option would be incorrect since it overstates the scope of closing by implying every type of account is closed. Permanent accounts are not closed; only temporary accounts are closed to prepare the books for the new period. 
To summarize the core idea: the closing procedure is designed to reset only the temporary accounts for the new period, not to close every single account in the ledger, which would erase essential carry-forward balances in asset, liability, and equity accounts.

Introduction to Financial Accounting M3: Quiz

All accounts need to be closed in order to prepare them for the next period's transactions.

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