Closing process

Update retained earnings
Reset temporary (or nominal) accounts
1. Revenues, expenses, and dividends represent amounts for a period of time; one must "zero out" these accounts at the end of each period.
2. Asset, liability, and equity accounts are called real accounts, as their balances are carried forward from period to period
Step 1: Close the Revenue account to a unique account called Income Summary
1. Income Summary: a non-financial statement account used only to facilitate the closing process.
Step 2: close expense accounts to Income Summary
Step 3: close the income summary account to retained earnings
Step 4: close the dividend account to retained earnings
Information taken from the adjusted trial balance
Step 5: Post closing trial balance
Process in context

Resource summary

	Created by Kevin Reynolds about 8 years ago