Do you want to learn more about debit, credit entries, and how to record your journal entries properly? Then, head over to our guide on journalizing transactions, with definitions and examples for business. Now, it’s time to close the income summary to the retained earnings https://quick-bookkeeping.net/ (since we’re dealing with a company, not a small business or sole proprietorship). Thus, the income summary temporarily holds only revenue and expense balances. As stated in the name, Temporary accounts are temporary and will last until the end of the fiscal period. The use of closing entries resets the temporary accounts to begin accumulating new transactions in the next period. Otherwise, the balances in these accounts would be incorrectly included in the totals for the following reporting period. The retained earnings account balance…