closing entries
DESCRIPTION
CHAPTER 10. CLOSING ENTRIES. 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. Closing Entries. The closing entries consist of the four steps:. - PowerPoint PPT PresentationTRANSCRIPT
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CLOSING ENTRIES
CHAPTER 10CHAPTER 10
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Closing EntriesClosing Entries
The final bookkeeping entries made at the end of an accounting period to transfer income and expense items to the balance sheet accounts.
Definition
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Closing EntriesClosing 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.
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Closing EntriesClosing Entries
STEP 1
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Closing EntriesClosing 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
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Closing EntriesClosing Entries
The posting is shown as following:
Photocopy Fees Earned Account No. 411
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 10
19
31
31
Adjusting
Closing
$9,900
$6,000
3,400
500
$6,000
9,400
9,900
___
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Closing EntriesClosing Entries
Income Summary Account No. 313
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 31 Closing
$9,900
$9,900
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Closing EntriesClosing Entries
STEP 2
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Closing EntriesClosing 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
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Closing EntriesClosing Entries
Depreciation Expense,
Photocopy Equipment 33
Depreciation Expense,
Office Equipment 88
Photocopy Supplies Expense 500
Office Supplies Expense 300
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Closing EntriesClosing EntriesThe posting is shown as following:
Office Wages Expense Account No. 511
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
25
31 Closing
$1,100
$1,100
$1,100
_____
Utility Expense Account No. 512
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
29
31 Closing
$230
$230
$230
_____
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Closing EntriesClosing EntriesTelephone Expense Account No. 513
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31 Closing
$120
$120
$120
____
Photocopy Supplies Expense Account No. 516
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$400
$400
$400
____
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Closing EntriesClosing EntriesOffice Supplies Expense Account No. 517
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$300
$300
$300
____
Rent Expense Account No. 514
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$500
$500
$500
____
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Closing EntriesClosing EntriesInsurance Expense Account No. 515
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$50
$50
$50
_____
Depreciation Expense, Photocopy Equipment Account No.542
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$33
$33
$33
____
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Closing EntriesClosing EntriesDepreciation Expense, Office Equipment Account No. 543
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$88
$88
$88
____
Income Summary Account No. 313
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$2,821
$9,900
$9,900
7,079
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STEP 3
Closing EntriesClosing Entries
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Closing EntriesClosing 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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Closing EntriesClosing EntriesIncome Summary Account No. 313
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 31
31
31
Closing
Closing
Closing
$2,821
7,079
$9,900
$9,900
7,079
_____
George Ross, Capital Account No. 311
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
3
31 Closing
$20,0007,079
$20,000 27,079
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Closing EntriesClosing Entries
STEP 4
10-20
Closing EntriesClosing EntriesStep 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.
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Closing EntriesClosing Entries
Jan. 31 George Ross, Capital $980
George Ross, Withdrawals $980
George Ross, Withdrawals Account No. 312
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
24
31 Closing
$980
$980
$980
_____
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Closing EntriesClosing Entries
George Ross, Capital Account No. 311
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 3
31
31
Closing
Closing
$980
$20,0007,079
$20,00027,079
26,099
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Closing EntriesClosing EntriesThe accounts after closing entries are posted
Cash Account No.111
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 36778914192425 29
$20,000
1,300 3,400
$9,900
$4,8002,0002,3006003,100
9801,100
230
$20,00015,20013,20010,90010,3007,2008,50011,90010,9209,820
9,590
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Closing EntriesClosing Entries
Accounts Receivable Account No.113
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 10
$6,000
$6,000
Photocopy Supplies Account No.115
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
8
31 Adjusting
$2,300
$500
$2,300
1,800
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Closing EntriesClosing EntriesOffice Supplies Account No. 116
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 8
31 Adjusting
$8,00
$3,00
$8,00
$5,00
Prepaid Rent Account No. 117
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
6
31 Adjusting
$4,800
$400
$4,800
4400
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Closing EntriesClosing EntriesPrepaid Insurance Account No. 118
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 8
31 Adjusting
$6,00
$50
$600
550
Photocopy Equipment Account No. 144
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
7Adjusting
$2,000
$2,000
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Closing EntriesClosing EntriesOffice Equipment Account No. 146
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 7
$5,300
$5,300
Accumulated Depreciation, Photocopy Equipment Account No. 145
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31Adjusting
$33 $33
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Closing EntriesClosing EntriesAccumulated Depreciation, Office Equipment Account No. 147
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 31 Adjusting
$88
$88
Accounts Payable Account No. 212
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
7
8
9
31
$3,100
$3,000
3,100
120
$3,000
6,100
3,000
3,120
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Closing EntriesClosing EntriesUnearned Photocopy Fees Account No. 213
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 14
31 Adjusting
$500
$1,300
$1,300
800
George Ross, Withdrawals Account No. 312
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
24
31Closing
$980
$980
$980
____
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Closing EntriesClosing EntriesGeorge Ross, Capital Account No. 311
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 3
31
31
Closing
Closing
$980
$20,000
7,079
$20,000
27,079
26,099
Income Summary Account No. 313
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
31
Closing
Closing
Closing
$2,821
7,079
$9,900 $9,900
7,079
_____
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Closing EntriesClosing EntriesPhotocopy Fees Earned Account No. 411
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 10
19
31
31
Adjusting
Closing
$9,900
$6,000
3,400
500
$6,000
9,400
9,900
_____
Office Wages Expense Account No. 511
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
25
31 Closing
$1,100
$1,100
$1,100
_______
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Closing EntriesClosing EntriesUtility Expense Account No. 512
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 29
31
Closing
$230
$230
$230
______
Telephone Expense Account No. 513
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31 Closing
$120
$120
$120
______
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Closing EntriesClosing EntriesPhotocopy Supplies Expense Account No. 516
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 31
31
Adjusting
Closing
$500
$500
$500
______
Office Supplies Expense Account No. 517
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$300
$300
$300
______
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Closing EntriesClosing EntriesRent Expense Account No. 514
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 31
31
Adjusting
Closing
$400
$400
$400
______
Insurance Expense Account No. 515
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$50
$50
$50
______
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Closing EntriesClosing EntriesDepreciation Expense, Photocopy Equipment Account No.542
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March 31
31
Adjusting
Closing
$33
$33
$33
______
Depreciation Expense, Office Equipment Account No. 543
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
2004
March
31
31
Adjusting
Closing
$88
$88
$88
______
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Closing EntriesClosing Entries
Once posted to the ledger
Revenue
Expense
Withdrawals
ZERO
The next accounting period
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The Post-closing Trial BalanceThe Post-closing 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 total debits must equal the total credits.
The trial balanceThe trial balance is a worksheet on which you list all your general ledger accounts and their debit or credit balance.
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Cash
Accounts Receivable
Photocopy Supplies
Office Supplies
Prepaid Rent
Prepaid Insurance
Art Equipment
Accumulated Depreciation,
Photocopy Equipment
Office Equipment
Accumulated Depreciation,
Office Equipment
Accounts Payable
Unearned Photocopy Fees
George Ross, Capital
Total
$9,590
6,000
1,800
500
4,400
550
2,000
5,300
$30,140
33
88
$3,120
800
26,099
$30,140
George Ross Photocopy Agency
Post-Closing Trial Balance
March 31, 2004
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WE ARE SAILING RIGHT ALONG!!