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Definition

Closing entries

Closing entries referred as entries that made at the end of an accounting period to transfer the balances of temporary accounts to a permanent owner’s equity account, Owner’s capital.

Closing entries formally recognize in the ledger the transfer of net income (or net loss) and owner’s drawing to owner’s capital. The owner’s equity statement shows the result of these entries. Closing entries also produce a zero balance in each temporary account. The temporary accounts are then ready to accumulate data in the next accounting period separate from the data of prior periods. Permanent accounts are not closed.

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