SAP Financial Accounting (SAP FI) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the SAP Financial Accounting (SAP FI) Exam. Boost your knowledge with diverse questions, hints, and detailed explanations. Get exam-ready and enhance your financial accounting career!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is the function of the year-end closing process?

To reset all account balances to zero
To close the previous fiscal year
To prepare financial statements for the new year
To evaluate asset values for depreciation

The correct answer is: To close the previous fiscal year

The year-end closing process primarily serves to close the previous fiscal year. This important function ensures that all financial transactions for the year are recorded and accounted for, which provides a complete and accurate representation of the company’s financial status. By formally closing the fiscal year, organizations can transition to the new fiscal year while maintaining clear and distinct financial records. During this process, all necessary adjustments are made, and temporary accounts (like revenues and expenses) are reset to zero in preparation for the upcoming year. This makes it easier to start fresh with new financial statements, ensuring continuity and clarity in reporting. In addition, closing the fiscal year is essential for compliance and audit purposes, as it sets the stage for calculating yearly profits or losses, and ultimately for informing tax declarations. Overall, this process signifies a crucial checkpoint in financial management, enabling better planning and forecasting for the future.