Closing expense accounts is a crucial step in the accounting cycle to ensure accurate financial reporting. At the end of an accounting period, all expense accounts, such as rent, utilities, and salaries, must be closed to reset their balances to zero for the next period. This is done by transferring the total expenses to the Income Summary account, which temporarily holds the company's net income or loss. The process involves debiting the Income Summary account and crediting each expense account accordingly. Finally, the net income or loss is transferred to the Retained Earnings account, completing the closing process and preparing the financial records for the next period.

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