The Closing Entry Process Consists of Closing What?

Closing Entry Process

The Closing Entry Process Consists of Closing Temporary Accounts (Revenues, Expenses, Gains & Losses) to Income Summary Account and then Income Summary Account is also closed to Income Statement at the end of the Accounting Period. This Process is necessary as it helps the business in measuring the Financial Performance or Net Income for the period.

This Closing Entry Process is also known as Closing Entries. All Permanent Accounts (Assets, Liabilities & Equity) which have closing balances are transferred to Balance Sheet and there is no need to close these Accounts until the owners and top management decides to close the business by entering into the process of Liquidation.