At the end of the period, the company must calculate the results of its operations. In other words, the company must ascertain the term’s profit or loss. For this aim, the balances of revenue accounts and expense accounts have to be posted to Income Summary account. By accounting meaning, the revenue accounts and expense accounts have to be closed and their balances have to be posted to Income Summary account. Because the company has so many different revenue and expense accounts separately, they have to be accumulated under one account in order to figure out the exact result. This account is the Income Summary account. After the accumulation of revenues and expenses under Income Summary account, the final result is clear. 

Transferring the balances of the revenue and expense accounts to Income summary account, and transferring Income Summary account’s balance to Capital account are called the “Closing Entries”. The accounts which are closed at the end of the term are called “temporary accounts” because they hold only one period’s transactions and they have to be zeroed for the next period.