What Accounts Are Affected / Not Affected By Closing Entries

When Closing Entries are recorded, then all the Temporary Accounts i.e., Revenues like Sales, Service Revenue, etc., and Expenses like Rent Expense, Advertising Expense, etc., are closed to Income Summary Account (which is also closed). So, these temporary accounts are affected by passing closing journal entries.

Dividend, which is a Contra Equity Account and distributed to shareholders of the company on the occurring of the profits, is also affected and it is deducted from Retained Earnings in order to find out net closing retained earnings which is the part of net income retained in the business.

So, Revenues, Expenses, Income Summary Account and Dividend are affected when we record closing entries.

What Accounts Are Not Affected By Closing Entries

All the Permanent Accounts (Assets, Liabilities & Equity) are not affected and these remain the same as these accounts have balances which are transferred to Balance Sheet.