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Closing entry for financial accounting

A journal entry that moves the effects of revenues or expenses to the owners' equity account. Only temporary account that is on the income statement is closed. The purpose of a closing entry is twofold. First, it moves revenue to retained earnings on the balance sheet. Second, it zeros out the income statement account. The temporary account is used to collect revenues and expenses for the accounting period. To do that correctly, they must start with nothing and then be increased or decreased by the business trans- actions for the period. Then, at the end of the period, these accounts must be made ready for the next accounting period by getting the balance to zero.

 

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