Accounting · Lesson Plan
Closing the Books
At the end of a fiscal year, revenue and expense accounts must be closed back to a zero balance so the next period can start fresh. This lesson teaches the closing process: which accounts are temporary (revenue, expenses, and drawing) versus permanent, why businesses close them at least annually, and how closing entries move those balances into retained earnings. Students work through a set of closing entries.
For Teachers
Lesson at a glance
- Topic
- Accounting
- Grade Level
- Grades 11–12 / College
- Resource Type
- Lesson + Worksheet
- Estimated Time
- 45–60 minutes
- Format
- Lesson + worked example
- Materials
- Printable lesson, worksheet, pencils
What Students Learn
Learning objectives
- Explain why temporary accounts are closed each period
- Distinguish temporary from permanent accounts
- Describe the steps of the closing process
- Prepare closing entries for revenue and expense accounts
- Show how closing affects retained earnings
Materials
What you’ll need
- Printed lesson and worksheet (one per student)
- Calculator
- Pencils
Key Terms
Vocabulary
- Temporary account
- A revenue, expense, or drawing account closed each period.
- Permanent account
- A balance-sheet account that carries its balance forward.
- Closing entry
- A journal entry that zeroes out a temporary account.
- Fiscal year
- The 12-month period a business uses for accounting.
- Retained earnings
- Profit kept in the business rather than paid out.
- Income summary
- A temporary account used to total revenues and expenses at closing.
For Teachers
Lesson plan
Estimated time: one 45–60 minute class period.
Lesson sequence
- Why close? (10 min). Resetting temporary accounts so periods don’t blur together.
- Temporary vs. permanent (12 min). Which accounts close and which carry forward.
- The closing entries (15 min). Walk the steps through the income summary into retained earnings.
- Worksheet (13 min). Students prepare a set of closing entries.
Assessment
Assess the worksheet for correctly identified temporary accounts and accurate closing entries.
Discussion
Discussion questions
- Why must temporary accounts be closed each period?
- Which accounts are temporary, and which are permanent?
- What is the role of the income summary account?
- How does closing affect retained earnings?
- Why do many businesses close monthly or quarterly too?
Printable Lesson & Worksheet
Closing the Books — Lesson & Worksheet
A printable accounting lesson and worksheet on closing the books: temporary vs. permanent accounts and preparing closing entries.
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