What are temporary accounts & how are they closed?

bhet

temporary accounts are also called nominal accounts, they are the items that normaly comprise the income statement..

they are closed by either dr or cr depending on its nature.

if it is an exp. it can be closed like this

dr. income summary
cr. expenses

if it is a rev account it will be closed like this

dr. revenue
cr. income summary

morgaine300

Drawing (or Dividend for a corporation) is also temporary and is also closed. However, it does not go through Income Summary as it's not related to net income.

To close any account, you reverse out its balance. i.e. if it's $100 debit balance, then you credit $100 to get rid of it. Or if it has $150 credit balance, then you debit $150 to get rid of it. The idea being to net each account to zero.

Since Drawing/Dividend is a debit balance, you have to credit that to get rid of it. And it closes to the "income containing account" -- i.e. capital or retained earnings, again depending on which you're using.

So you'll either have:
Dr Capital, Cr Drawing
or
Dr Retained Earnings, Cr Dividend

(You won't have both. Use the one with the accounts you're used to seeing.)