closing entry

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 January 2011 for transferring expense and income account balances to profit and loss we need to pass a closing entry.
Is that entry mandatory to be passed in the books?

can income and expense ledger show flowing transaction accross the years even if we are taking opening trial balance without p&L figures.

CA Jeen paul

CA Jeen paul (Expert)

22 January 2011 balance sheet is prepared after all the reveue accounts are summed up in a ledger account called P/L a/c. balance in the P&l a/c shows the accumulated opreating results of the company.
it is mandatory to pass closing entries in the books of account. in mannual accounting system you need to pass journal entries in the jurnal book and respective posting should be made in the ledger to close the books of accounts. only those heads appearing in the balace sheet will be carried forward to next year.
no the income and expenses ledger should not show the flowing transactions because every entity is mandatorily prepare the financial statements and submit to various athorities, hence book closing is must
in a comutarised accounting envioronment these book closing will be auotmatically done by the computer new genration accountants may not know about this closing entry

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