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Accounting
Closing Entries
Journal entries that zero out all revenue and expense accounts at the end of the year so they start fresh for the next period.
Closing entries transfer the net profit or loss into Retained Earnings and reset temporary accounts (revenues, expenses, dividends) to zero. Permanent accounts like cash and equipment stay untouched.It's like hitting the reset button on your video game score at the end of each level so you start the next level with zero points again.
Real world: On December 31 a business closes out its sales, wages, and rent expense accounts into Retained Earnings so January 1 starts with clean numbers.
💡 Closing entries keep your books organized year after year — they're what let you compare January to January without last year's numbers messing things up.