Which Accounts Are Affected And Not Affected By Closing Entries

What Accounts Are Affected By Closing Entries

In Closing Entries, all temporary accounts are closed at the end of the accounting period.

There are four types of accounts which are affected by closing entry process:

a) All Revenues Accounts or all credit accounts in Income Statement are closed by transferring these to Income Summary Account.

b) All Expenses Accounts or all debits accounts in Income Statement are closed by transferring these to Income Summary Account.

(c) Income Summary Account which is prepared on temporary basis in order to close all expenses and revenues accounts and this account is also finally closed to Retained Earnings Account in order to calculate ending or closing retained earnings.

(d) A Dividend Account (prepared to calculate a share of distribution among shareholders from net profits / net income for the period) which is also closed to Retained Earnings Account at the end of the accounting period.

What Accounts Are Not Affected By Closing Entries

All permanent accounts (Assets, Liabilities and Owner’s Equity or Equity) are not closed and transferred to balance sheet as on specified time of a specified date. So, permanent or real accounts are not affected by closing entries. The balances of these accounts are carried to the next accounting period until the business is closed or gone into liquidation.