ACCT 212 Final Exam Week 8,
It is absolutely necessary to close all of the temporary accounts at the end of a term so that the total revenues/expenses for that period can be calculated with accuracy and so that these accounts begin with a zeroed out balance during the next term. Temporary accounts need to have a zero closing balance so that it doesn’t appear in the balance sheet.
There would be no carryover of balances of temporary accounts (which is why these accounts are called temporary accounts). If the temporary accounts weren’t closed, the actual revenues/expenses of the previous term(s) would be overstated.
There would be no carryover of balances of temporary accounts (which is why these accounts are called temporary accounts). If the temporary accounts weren’t closed, the actual revenues/expenses of the previous term(s) would be overstated.
(2)
The expense/revenue accounts would be closed to another temporary account called the Income Summary account which would also be closed to Retained Earnings. The Income Summary would be credited for any revenues and would be debited for any expenses.
Example of the closing of an expense account + Supplies expense in the form of a journal entry:
Date Account titles/Description Debit Credit
Dec-31 Income summary (debit) $1
Supplies expense (Credit) $1
Supplies expense (Credit) $1
ACCT 212 FINAL EXAM WEEK 8
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