What is a Closing Entry?
Closing entries are the final bookkeeping entries that are entered into accounting records before closing out the accounting period and moving forward in transferring both income and expense data to the records that will represent the next accounting period. The closing entry data that is entered at the end of one period serves as the opening entry data for the new period. This approach makes it possible to easily evaluate the financial condition of the period, and prepare for any adjustments that may need to take place in the coming period. The use of a closing entry approach makes it possible to understand the impact of both generated revenue or income and the effect of expenses on the net worth of the entity. As an accounting tool, the closing entry can be used just as effectively with monthly accounting ledgers that track a home budget as they can with more complicated corporate accounting. In both cases, the closing entry provides a logical point of data to end one accounting cycl
