MGT 11A Chapter Notes - Chapter 3: Retained Earnings, Trial Balance, Current Liability
Document Summary
Closing process: occurs at the end of an accounting period after financial statements are completed. Resets revenue, expense, and dividends account balances to zero at the end of each period. Updates retained earnings account for inclusion on the balance sheet. So these accounts can properly measure income and dividends for the next period. Helps summarize a period"s revenues and expenses. Temporary accounts: relate to one accounting period. Include all income statement accounts (revenues and expenses), the dividends account, and the income summary account. Closing process applies only to temporary accounts. Permanent accounts: report on activities to one or more future accounting periods. Include asset, liability, and equity accounts (common stock and retained earnings) (all balance sheet accounts) Permanent accounts are not closed each period and carry their ending balance into future periods. Closing entries: transfer the end-of-period balances in revenue, expense, and dividends accounts to the permanent retained earnings account.
