Closing Entries Ultimately Will Affect What?
Closing Entries ultimately will affect retained earnings account as all t h e temporary accounts (Revenues & Expenses Accounts) firstly transferred to Income Summary Account and t h en transferred to income summary account w h ic h is closed to retained earnings. Dividend and drawings accounts are also closed to retained earnings account w h ic h is finally added to owner’s equity or equity account. Actually, all of the revenues and expenses accounts are created as a result of profitab le activities of th e owners of t h e b usi ness, so t hese affect ultimately affect retai ned earnings and owner’s equity or equity account. But, closi ng entry process does not affect permanent accounts suc h as assets e.g., Cash Accou nt, Accounts Receivab le, etc., a nd lia b ilities such as Accou nts Payab le, Loa ns, etc. So, we can say t h at closing entry entry process affects owner’s equity or equity account as t h e closing of temporary accounts are closed at the end of ...