MGT 11A Chapter Notes - Chapter 3 : Financial Statement, Accrued Interest, Trial Balance
Document Summary
It prepares accounts for recording transactions, and the events of the next period. It resets revenue, expense, dividends account balances to zero at end of each period. Helps to properly measure income & dividends for next period. Helps in summarizing period"s revenues & expenses. Temp (aka nominal) accts = accumulate data related to 1 accounting period. B/c these accounts (income statement, dividends, income summary) are opened, recorded, and closed in each period. Closing process applies only to temp accts. Permanent (aka real) accts = reports activities related to one or more future accounting periods. Ending balances are carried into next period. Generally consist of all balance sheet accounts. Asset, liability, equity accounts are not closed. Means to transfer end-of-period balances in revenue, expense, dividends accts to permanent retained earnings account. Revenue, expense, dividends accts must begin each period with 0 balances. Retained earnings must reflect prior periods" revenues, expenses, and dividends.
