At the end of every accounting period, you must close the balances in your sales and expense accounts. You open the income summary account to hold these account balances during the closing process.

At the end of an accounting period, certain accounts are closed so they have a zero balance at the beginning of the new accounting period. The act of zeroing these accounts is called closing entries.

Closing entries transfer revenue and expense balances to the retained earnings account. This process resets the temporary account balances to zero for the new accounting period. Recording closing ...