Temporary accounts
In one sentenceThe revenue, expense and drawings accounts that measure the result of a single year; they are closed at its end and their net is transferred to equity.
Simply put
Sales, salaries and rent measure what happened during the year only. So they are reset to zero with closing entries, so that the following year starts from zero and measures its own profit.
They are also called nominal accounts. Their net after closing (profit or loss) goes to retained earnings.
Worked example
A service office earned revenue of 400,000 SAR during the year, and its expenses were 320,000 SAR.
Closing the revenue accounts400,000 SAR
Closing the expense accounts320,000 SAR
Net: 400,000 − 320,00080,000 SAR
Net profit transferred to retained earnings80,000 SAR
Don't confuse it with
Permanent accountsPermanent accounts are not closed, and their year-end balance is their balance at the start of the following year.