Question

what are the four closing entries in a general ledger or journal ledger ? why are they important?

Answer 1

1) Closing the revenue account- It means transferring the credit balances in the revenue account to a clearing account called as income statement or profit and loss account.

2)Closing the expense account- It means transferring the debit balances in the expense account to a clearing account called as income statement or profit and loss account.

3)Closing the income summary account- It means transferring the balances in the income statement account to the retained earnings account.

4)Closing the dividend account- Transferring the debit balance of the dividend account to the retained earnings account.

The Closing entries are important to close the temporary account balances such as income and expense accounts to zero because they are reported in defined periods and are not carried over into the future.