Respuesta :
when all closing entries are completed, the owner's capital account should be the same as the capital account balance in the balance sheet for the fiscal period.
Accountants close revenue, expense, and drawing accounts at the conclusion of each fiscal year, or sporadically, at the conclusion of each accounting quarter, to update the balance in the owner's capital account. These accounts are referred to as temporary or nominal accounts for this reason. Contrarily, as their ending balance in one accounting period is always their starting balance in the following accounting period, assets, liabilities, and the owner's capital account are referred to as permanent or real accounts. The balance of an account is reset to zero when it is closed by an accountant. It is simpler to track income, expenses, and withdrawals and to compare them from one year to the next when there are no balances in the temporary accounts at the beginning of each year.All temporary account balances are transferred to the owner's capital account through four closing entries.
Close the revenue accounts on the income statement that have credit balances to a special temporary account called "income summary."
Close any income statement accounts having debit balances to the income summary account (usually expense accounts). The balance of the income summary account is equal to the company's net profit or loss for the period once all revenue and expense accounts have been closed.
Close the owner's capital account or, in corporations, the retained earnings account, to the income summary. The capital or retained earnings account of the permanent owner is simply kept clutter-free by the income summary account.
Reconnect the owner's capital account and drawing account. This entry closes any dividend accounts to the retained earnings account for corporations. The closing entries for the Greener Landscape Group are shown below for illustration reasons.
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