At the end of the year, temporary accounts that must be closed include:
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Revenue accounts: These accounts record the income earned during the year and must be closed to zero out their balances.
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Expense accounts: While not specifically listed in your question, expense accounts are also temporary accounts that need to be closed at the end of the year.
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Dividends (or Withdrawals): If a corporation or sole proprietorship has distributed profits to owners/shareholders, this account must also be closed.
Temporary accounts like revenue and expense accounts are closed to the Income Summary account, and then ultimately to the Retained Earnings account (for corporations) or the Owner's Equity account (for sole proprietorships).
In contrast, the following accounts are not closed at the end of the year:
- Assets (permanent accounts)
- Liabilities (permanent accounts)
- Capital (or Owner's Equity) (permanent accounts)
Thus, the temporary accounts that must be closed at the end of the year are primarily revenue accounts along with expense accounts and dividends or withdrawals.
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