Closing Entries

Closing entries are journal entries made at the end of an accounting period to close out the temporary accounts and transfer their balances to the permanent accounts. Temporary accounts , such as revenue, expense, and dividend accounts, are used to record transactions that are related to a specific accounting period. At the end of the period, the balances in these accounts are transferred to the retained earnings account or another permanent account, which represents the cumulative earnings of the company since its inception.