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Transcript
Slide 1: There are two main types of accounts: Real or permanent
accounts and nominal or temporary accounts.
Real accounts are not closed at the end
of the accounting cycle to a zero balance.
Balance sheet accounts are permanent or real accounts. They are never
closed to a zero balance at the end of the accounting cycle.
Nominal or temporary accounts are
closed to zero at the end of each accounting cycle. Essentially they are
reset for the next cycle. Nominal accounts are those accounts found on
the income statement.
Slide 2:
When we reset the temporary or nominal
accounts we make a closing entry. The revenue and expense accounts are
closed to a temporary account called an income summary account. The
income summary account is then closed to the retained earnings account
which is a real or permanent account found on the balance sheet.
Slide 3:
Using the following information let us
prepare a closing account
Slide 4:
Here we close the revenue and expense
accounts to income summary
Slide 5:
Now we close the income summary account to
retained earnings
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