Accounting Dictionary - Letter C

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Closing entries
are made to free up (to zero) the nominal (temporary) accounts so that they are prepared to be used in the next accounting period. All revenue and expense account balances are moved to the income summary account when closing entries are posted. The difference between the debit and credit side in the income summary account represents net income (credits exceed debits) or net loss (debits exceed credits) for the period. The net income or loss is then transferred from the income summary account to the retained earnings account. The new accounting period starts with zero balances in revenue and expense accounts.
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