Financial Accounting › Adjusting & Closing Entries

What are closing entries?

Intermediate

Answer

Entries that transfer income and expense balances to the profit and loss (and then retained earnings), resetting those accounts to zero for the next period.
Dr Sales 50,000 / Cr Income Summary 50,000 (then to Retained Earnings)
Real-world example At year-end, revenue and expense accounts are closed so the new year starts fresh.