Reflect on closing-entry mastery and preview the full month-end checklist
At the start of this lesson, Sarah's revenue and expense accounts were stuck carrying March's balances into April. Now you know exactly how to fix that.
- • Sort any account into temporary or permanent
- • Execute the four-step closing sequence in order
- • Calculate ending Retained Earnings after closing
- • Verify that all temporary accounts are zero after closing
- • Explain why Income Summary exists and what it proves
Ending RE = Beginning RE + Net Income − Dividends
Where Net Income = Total Revenues − Total Expenses
This single formula captures the entire business result of the closing process.
Closing entries are not the first thing Sarah does at month-end. They come at the end of a specific sequence. Here's where today's lesson sits:
Record regular transactions
All the invoices, payments, and receipts for the month
Record adjusting entries
Accruals, deferrals, depreciation (Lesson 02)
Record closing entries
Reset temporary accounts — today's lesson
Prepare post-closing trial balance
Verify only permanent accounts remain with balances
Coming Next: Lesson 04
In Lesson 04 you'll pull all of these steps together into one complete manual month-end close checklist. You'll practice the full sequence from unadjusted trial balance through post-closing trial balance, including any recurring adjustments like depreciation that Sarah needs every month. That checklist becomes the blueprint for the Month-End Wizard you'll automate later.