Accounting › Section D · Completing the accounting cycle › Topic D.1
Closing entries
Revenue, expense and dividend accounts measure one period, so at the end of every year they must be emptied and their net effect moved into Retained Earnings. Closing entries do exactly that, and they leave the books ready for a clean start.
In this topic
- Starting each year at zero
- Temporary and permanent accounts
- The Income Summary account
- The four closing entries
- Worked example: closing a profitable year
- Worked example: finishing Bluefin's close
- Worked example: closing a net loss
- Variations you will meet
- Optional reversing entries
- Common mistakes to avoid
- Key takeaways
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