Key Terms
The key terms used in the unit are listed below:
- Closing Entries: Closing entries are journal entries posted to transfer the temporary account balances to close (or reduce) it to zero.
- Real Account: The balances of the accounts reported on the balance sheet are carried forward from year to year; they are also called permanent accounts.
- Nominal Account: Transactions such as revenue expenses and withdrawals accounts report amounts for only one period; they are called temporary (or nominal) accounts.
- Income Summary Account: The account in the general ledger used to summarize (and close) the revenue and expenses for the accounting period.