Final answer:
In accounting, there are two types of journal entries needed to change general ledger account balances at the end of the fiscal period: adjusting entries and closing entries.
Step-by-step explanation:
In accounting, there are two types of journal entries that are used to change general ledger account balances at the end of the fiscal period. These types are called adjusting entries and closing entries.
- Adjusting entries: Adjusting entries are made to ensure that the revenue and expenses are correctly recorded in the appropriate accounting period. These entries are necessary because some transactions may span across multiple periods, and adjusting entries allocate the revenue or expenses to the correct period. For example, if a company receives payment for services that will be performed over the next six months, an adjusting entry is made to recognize a portion of the revenue in the current period.
- Closing entries: Closing entries are made to transfer the balances of temporary accounts to the retained earnings or capital account at the end of the fiscal period. Temporary accounts, such as revenue, expenses, and dividends, are closed to zero so that they start with a clean balance in the next accounting period. For example, at the end of the fiscal year, the revenue account is closed by transferring its balance to the retained earnings account.