A temporary account used only in the closing process to where the balances of revenue and expense accounts are transferred; its balance equals net income or net loss and is transferred to the owner's capital account.
Closing Temporary Accounts
• revenue, expense and drawing accounts are called temporary accounts or nominal accounts.
• they accumulate the transactions of only one accounting period.
• at the end of the accounting period, the balances in these accounts are transferred to the capital account through a temporary clearing account called Income Summary.
• this process updates the balance in the capital account for changes that have occured during the period and it returns the balances of the temporary accounts to zero.
• the owner's equity account and the other balance sheet accounts are called real accounts.
• the process of transferring balances of the temporary accounts to capital is called closing the accounts.