As we approach the end of the year, allow me to focus on the closing process. The closing process is a method whereby it reduces the balance of nominal (temporary) accounts to zero in order to prepare the accounts for next period’s transactions.
A company will transfer all revenue and expense account balances, known as income statement items, to a clearing or suspense account. This is also called the Income Summary. The matching rule applies here as well.
The income summary represents the net income or net loss to the owners’ equity.