End-year adjustments - Closing the books

4 important questions on End-year adjustments - Closing the books

Closing the Books Closing entries:

1. Transfer net income (or loss) to Retained Earnings.

2. Establish a zero balance in each of the temporary accounts to start the next accounting period

Closing the books
The following accounts are called temporary or nominal accounts and are closed at the end of the period . .

• Revenues.
• Expenses.
• Gains.
• Losses.
• Dividends declared.

Closing the Books
Permanent, or real accounts, and are never closed.
3

  • Assets.
  • Liabilities.
  • Stockholders’ Equity. 
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Closing the Books Two steps are used in the closing process . . .

1. Close revenues and gains to Retained Earnings.
2. Close expenses and losses to Retained Earnings.

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