Closing Entries
Accounting glossary · Understand, connect, apply
Closing entries transfer balances from temporary accounts at period-end so those accounts start the next period at zero, while updating equity.
Example
Revenue and expense balances are closed into a summary account or retained earnings/capital; drawings or dividends are closed separately as appropriate.
Remember the difference
Closing does not mean shutting the business or paying its debts. Permanent accounts carry forward.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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