XACC 280 Wk 5 - DQ 2 - 8048

Solution Posted by
3number
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Request Description

Revenue, expense, and dividend accounts are all temporary accounts and thus need to be closed at the end of the accounting period to make sure the permanent accounts (asset, liability, and equity) are properly stated and reflect the results of operations.  When closing the temporary accounts, the ending balances of the revenue and expense accounts are moved to an income summary account which is then closed to retained earnings.  This process ensures the revenue and expense accounts are "reset" back to zero, and the net income or loss of the company is added to retained earnings. 

Solution Description

Dividends are also closed to retained earnings,