CLOSING ENTRIES

1. CHAPTER 10 CLOSING ENTRIES

2. Closing Entries Definition The final bookkeeping entries made at the end of an accounting period to transfer income and expense items to the balance sheet accounts.

3. Closing Entries The closing entries consist of the four steps: First, the revenue accounts are closed by transferring their balances to the income summary account. Second, the expense accounts are closed by transferring their balances to the income summary account. Third, the income summary is closed by transferring the net balance to capital account. Last, the withdrawals accounts are closed by transferring the balance to capital account.

4. Closing Entries STEP 1

5. Closing Entries Step 1. Closing the credit balances from income statement accounts to the income summary. Jan. 31 Photocopy Fees Earned $9,900 Income Summary $9,900

6. Closing Entries The posting is shown as following:

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8. Closing Entries STEP 2

9. Closing Entries Step 2. Closing the debit balances from income statement accounts to the income summary. Jan. 31 Income Summary $2,821 Office Wages Expense 1,100 Utility Expense 230 Telephone Expense 120 Rent Expense 400 Insurance Expense 50

10. Closing Entries Photocopy Supplies Expense 500 Office Supplies Expense 300 Depreciation Expense, Photocopy Equipment 33 Depreciation Expense, Office Equipment 88

11. Closing Entries The posting is shown as following:

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16. Closing Entries STEP 3

17. Closing Entries Step 3. Closing the income summary account to the capital account. Jan. 31 Income Summary $7,079 George Ross, Capital $7,079

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19. Closing Entries STEP 4

20. Closing Entries Step 4.Closing the Withdrawals Account to the Capital Account. The Withdrawals account shows the amount that the owner takes from the business account for personal living expenditures.

21. Closing Entries Jan. 31 George Ross, Capital $980 George Ross, Withdrawals $980

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23. Closing Entries The accounts after closing entries are posted

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36. Closing Entries Once posted to the ledger The next accounting period Revenue ZERO Expense Withdrawals 0

37. The Post-closing Trial Balance The trial balance is a worksheet on which you list all your general ledger accounts and their debit or credit balance. The trial balance It can be used to alert you to errors in your books during the process of posting the adjustments and closing entries to the ledger accounts. The totaldebits must equal the totalcredits.

38. George Ross Photocopy Agency Post-Closing Trial Balance March 31, 2004

39. WE ARE SAILING RIGHT ALONG!!