Closing transfers in a nutshell
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Video Overview

At the end of a financial year, every business runs a procedure referred to as a 'year-end'. This entails the closing off of the nominal accounts in the trial balance to two final accounts. The first of the two final accounts is known as the Trading account, and it hosts the net sales, cost of sales and gross profit earner for the period. The gross profit is transferred to the Profit and loss acccount, where additional income and expense accounts are incorporated, so that the net profit or loss can be determined. This tutorial explains how and why these closing transfers are done, as well as the transfer of the net result to the Capital account.