Describe the closing entries process at the end of the accounting period

Answer 1

CLOSING ENTRIES

At the end of the accounting period, the revenue and expense accounts have served their purpose in accumulating the amounts to be included as line items on the income statement. That is, each revenue account contains a total of that revenue, and each expense account contains a total for that expense. Income statement accounts are temporary accounts and, as such, will have beginning and ending balances of zero. The next step is to transfer the amounts in the revenue and expense accounts to the Retained Earnings account—that is, to close each revenue and expense account for the period. The closing process involves reducing to zero the balance in each income statement account by debiting the revenue accounts and crediting the expense accounts, and transferring to Retained Earnings the differences between total revenues and total expenses.

An income statement account with a debit balance requires a closing entry that credits that account, because a credit closing entry will result in a zero ending balance in the account.
An income statement account with a credit balance requires a closing entry that debits that account, because a debit closing entry will result in a zero ending balance in the account.