What is the purpose of applying closing procedures at the end of each fiscal year?
submitted by Ophelia Payne

Ian

To clear out the income and expense accounts of old transactions. That way when you start the new year it's all clean. You can see the actual profit or loss for that specific year without mixing it with the new year's data.

Johnson

The main goal of closing procedures is to reset temporary accounts, like revenues and expenses, to zero so that the new fiscal year can start fresh. Earnings are rolled over to retained earnings or owner's equity.

The whole point is to keep the accounts clean. It makes it so income and expenses are easier to track in each period. You wouldn't want to leave some income in the account and then find it in the next accounting period, because you'd think you made more money than you did.