How to Close Ledger Accounts ?

In the business, businessman keeps different ledger accounts. In the beginning of financial year, businessman opens new ledger books and in the end of year, he closes same books. Now, question is arise, how to close ledger accounts. It is very simple.

All personal and real accounts of assets will be closed by getting their debit or credit balance and then it is showed in the balance sheet as assets or liabilities. Then we carried it to next financial year. Last year closing balance of assets and liabilities accounts will be the opening balance of next financial year.

But system of closing personal and real account will not apply on nominal and accounts relating to goods. These accounts will go to trading and profit and loss account according to the nature of expenses. Purchase account , sale account , purchase return account , sale return account ,opening stock account and direct expenses account will be closed by transferring to trading account and other indirect expenses and indirect income account will be closed by transferring to profit and loss account .