Closing entries are journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, ensuring that revenues and expenses are reset for the new period. This process helps in accurately reflecting the financial performance and position of a business by ensuring that income statement accounts start with zero balances in the next accounting cycle.

Closing Entries

Closing entries

Journal entries are fundamental accounting records that document each financial transaction of a business, ensuring that every transaction is accurately recorded in the company's books. They typically include the date, accounts impacted, amounts debited and credited, and a brief description, forming the basis for the double-entry bookkeeping system.

journal entries

end of an accounting period

temporary account balances

Permanent accounts, also known as real accounts, are accounts that carry their balances beyond the end of an accounting period and into the next. They are essential for tracking the ongoing financial position of a company, as they include assets, liabilities, and equity accounts that do not close at the end of the period.

permanent accounts

revenues and expenses

new period

Financial performance refers to the measure of how well a company can use assets from its primary mode of business and generate revenues. It is a comprehensive assessment of a firm's overall financial health over a given period, typically evaluated through profitability, liquidity, solvency, and efficiency metrics.

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