Final answer:
Closing the accounts reduces the balance of nominal accounts to zero in preparation for the next period's transactions.
Step-by-step explanation:
In accounting, the process of reducing the balance of nominal (temporary) accounts to zero in order to prepare the accounts for the next period's transactions is known as closing the accounts.
Closing the accounts involves transferring the balances of these accounts to the income summary account and then to the retained earnings account for corporations, or to the owner's equity account for sole proprietors and partnerships.
This is done at the end of an accounting period, such as monthly, quarterly, or annually, to ensure the accuracy of financial statements and start the next period with zero balances in the temporary accounts.