CLOSING ACCOUNTS

The revenue expense and drawing accounts called temporary accounts or nominal accounts because they accumulate the transactions of only one accounting period at the end of this accounting period, the changes in owners equity accumulated in the temporary accounts are transferred into the owner's capital account.This process serve two purpose .first it updates the balance of the owner's capital account for changes in owner's equity occurring during the accounting period ,second it returns the balance of the temporary accounts to zero so that they are measuring the revenue ,expense and drawings to the next accounting period.The owners capital accounting and other balance sheet are called permanent or real accounts because their balance continue to exist beyond the current accounting period the  process of transferring the balance of the temporary accounts into the owner permanent capital account is called closing the accounts,the journal entries made for the purpose of closing the temporary accounts are called closing entries.