Acct 2301 1st Edition Lecture 5 Outline of Last Lecture I Analyzing and Recording Transactions Outline of Current Lecture II Analyzing and Recording Transactions cont Current Lecture 8 Closing the books permanent and temporary accounts At the end of an accounting period all accounts are prepared for the next period In this regard it is important to distinguish between permanent and temporary accounts Balance sheet accounts i e assets liabilities and equity have a continual nature therefore they are not closed after each period That s why they are called permanent accounts Permanent accounts are balance sheet accounts They are not closed after each period Their balances are carried forward into the next period Permanent accounts are also called real accounts These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute In contrast revenue expense and distribution accounts are used to collect information about a single accounting period At the end of a period amounts in revenue expense and distribution accounts are transferred to the Retained Earnings account Accordingly the revenue expense and distribution accounts must have zero balances after closing the books at the end of one accounting period and at the beginning of the next period Temporary accounts are closed at the end of each period These are mostly income statement accounts except for a distribution account that is an equity statement account Temporary accounts are also called nominal accounts The process of transferring the balances from the temporary accounts to the permanent account i e the Retained Earnings account is referred to as closing the accounts or closing the books
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