ABSTRACT
At the end of each accounting year, certain adjustments are made to the accounts to allow an accurate profit for the year to be calculated and to make sure the balance sheet gives an accurate summary of the financial position of the business. Nominal expense ledgers are used to keep a record of the cumulative expenditure of the business for the year and, at the end of each accounting period, the balances on the revenue and expense ledgers are transferred to the profit and loss account to calculate profit. As a result, the balance on each revenue and expense ledger is reduced to nil at the end of the accounting period; this allows the process to be repeated in the next accounting period and is known as balancing and closing ledgers.
