id = "period-a-close-sweeps-the-year-into-capital"
title = "A close zeroes revenue and expenses into equity, and the closed period takes no new postings"
rule = "A close MUST zero every revenue and expense account through its last day and credit equity with exactly the net income; a period once closed MUST take no new postings."
status = "AUTHORITY"
sources = [
  "Pacioli, Summa (1494), ch. 34: \"you shall close this account into the capital account\" (docs/spec/sources/pacioli-1494.md)",
  "OpenStax, Principles of Accounting, Vol. 1, 5.1: temporary accounts are closed at the end of each period (docs/spec/rules.md B-11)",
  "CONVENTION (docs/spec/rules.md B-12): a closed period is locked, which follows from posted-is-forever",
]
tags = ["accrual", "book", "us", "period", "close"]

[setup]
currency = "USD"
fiscal_year_start = "01-01"
basis = "accrual"
rounding = "half-even"

[[setup.accounts]]
code = "1000"
name = "Cash"
type = "asset"

[[setup.accounts]]
code = "2000"
name = "Loan"
type = "liability"

[[setup.accounts]]
code = "3000"
name = "Capital"
type = "equity"

[[setup.accounts]]
code = "4000"
name = "Sales"
type = "revenue"
tax_category = "gross_receipts"

[[setup.accounts]]
code = "6000"
name = "Rent"
type = "expense"
tax_category = "rent_property"

[[events]]
date = "2026-01-02"
description = "Members put in cash"
lines = [
  { account = "1000", side = "debit", amount = "5000.00" },
  { account = "3000", side = "credit", amount = "5000.00" },
]

[[events]]
date = "2026-02-10"
description = "A sale"
lines = [
  { account = "1000", side = "debit", amount = "900.00" },
  { account = "4000", side = "credit", amount = "900.00" },
]

[[events]]
date = "2026-03-10"
description = "Rent"
lines = [
  { account = "6000", side = "debit", amount = "350.00" },
  { account = "1000", side = "credit", amount = "350.00" },
]

# Close January 1 through March 31 into capital.
[[events]]
date = "2026-03-31"
description = "Close the quarter"
close = { start = "2026-01-01", to = "retained_earnings" }

# March 31 is closed: an entry dated inside the quarter is refused.
[[events]]
date = "2026-03-15"
description = "A late sale"
refused = "period_closed"
lines = [
  { account = "1000", side = "debit", amount = "50.00" },
  { account = "4000", side = "credit", amount = "50.00" },
]

# By hand: net income = 900.00 - 350.00 = 550.00. Revenue and expense are
# zero; the 550.00 lands in Retained Earnings (3999, the account the books
# create for the close), so equity is 5000.00 + 550.00 = 5550.00; cash is
# 5000 + 900 - 350 = 5550.00, so assets equal equity.
[[expect]]
query = "balances"
as_of = "2026-12-31"
[expect.values]
"1000" = "5550.00"
"3000" = "5000.00"
"3999" = "550.00"
"4000" = "0.00"
"6000" = "0.00"

# The statement for the quarter excludes the close: the year's income is
# still reported.
[[expect]]
query = "profit_and_loss"
from = "2026-01-01"
to = "2026-03-31"
[expect.values]
"4000" = "900.00"
"6000" = "350.00"
net_income = "550.00"