closing entries

10-1

CLOSING ENTRIES

CHAPTER 10CHAPTER 10

10-2

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

10-3


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.

10-4


STEP 1

10-5


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

10-6


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

___

10-7


Income Summary Account No. 313

Date Item Post.

Ref.


Debit Credit

2004

March 31 Closing

$9,900

$9,900

10-8


STEP 2

10-9


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

10-10


Depreciation Expense,

Photocopy Equipment 33

Depreciation Expense,

Office Equipment 88

Photocopy Supplies Expense 500

Office Supplies Expense 300

10-11

Closing EntriesClosing EntriesThe posting is shown as following:

Office Wages Expense Account No. 511

Date Item Post.

Ref.


Debit Credit

2004

March

25

31 Closing

$1,100

$1,100

$1,100

_____

Utility Expense Account No. 512

Date Item Post.

Ref.


Debit Credit

2004

March

29

31 Closing

$230

$230

$230

_____

10-12

Closing EntriesClosing EntriesTelephone Expense Account No. 513

Date Item Post.

Ref.


Debit Credit

2004

March

31

31 Closing

$120

$120

$120

____

Photocopy Supplies Expense Account No. 516

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$400

$400

$400

____

10-13

Closing EntriesClosing EntriesOffice Supplies Expense Account No. 517

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$300

$300

$300

____

Rent Expense Account No. 514

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$500

$500

$500

____

10-14

Closing EntriesClosing EntriesInsurance Expense Account No. 515

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$50

$50

$50

_____

Depreciation Expense, Photocopy Equipment Account No.542

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$33

$33

$33

____

10-15

Closing EntriesClosing EntriesDepreciation Expense, Office Equipment Account No. 543

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$88

$88

$88

____


Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$2,821

$9,900

$9,900

7,079

10-16

STEP 3


10-17


Step 3. Closing the income summary account to the capital account.

Jan. 31 Income Summary $7,079

George Ross, Capital $7,079

10-18

Closing EntriesClosing EntriesIncome Summary Account No. 313

Date Item Post.

Ref.


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

2004

March

3

31 Closing

$20,0007,079

$20,000 27,079

10-19


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.

10-21


Jan. 31 George Ross, Capital $980

George Ross, Withdrawals $980

George Ross, Withdrawals Account No. 312

Date Item Post.

Ref.


Debit Credit

2004

March

24

31 Closing

$980

$980

$980

_____

10-22


George Ross, Capital Account No. 311

Date Item Post.

Ref.


Debit Credit

2004

March 3

31

31

Closing

Closing

$980

$20,0007,079

$20,00027,079

26,099

10-23

Closing EntriesClosing EntriesThe accounts after closing entries are posted

Cash Account No.111

Date Item Post.

Ref.


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

10-24


Accounts Receivable Account No.113

Date Item Post.

Ref.


Debit Credit

2004

March 10

$6,000

$6,000

Photocopy Supplies Account No.115

Date Item Post.

Ref.


Debit Credit

2004

March

8

31 Adjusting

$2,300

$500

$2,300

1,800

10-25

Closing EntriesClosing EntriesOffice Supplies Account No. 116

Date Item Post.

Ref.


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

2004

March

6

31 Adjusting

$4,800

$400

$4,800

4400

10-26

Closing EntriesClosing EntriesPrepaid Insurance Account No. 118

Date Item Post.

Ref.


Debit Credit

2004

March 8

31 Adjusting

$6,00

$50

$600

550

Photocopy Equipment Account No. 144

Date Item Post.

Ref.


Debit Credit

2004

March

7Adjusting

$2,000

$2,000

10-27

Closing EntriesClosing EntriesOffice Equipment Account No. 146

Date Item Post.

Ref.


Debit Credit

2004

March 7

$5,300

$5,300

Accumulated Depreciation, Photocopy Equipment Account No. 145

Date Item Post.

Ref.


Debit Credit

2004

March

31Adjusting

$33 $33

10-28

Closing EntriesClosing EntriesAccumulated Depreciation, Office Equipment Account No. 147

Date Item Post.

Ref.


Debit Credit

2004

March 31 Adjusting

$88

$88

Accounts Payable Account No. 212

Date Item Post.

Ref.


Debit Credit

2004

March

7

8

9

31

$3,100

$3,000

3,100

120

$3,000

6,100

3,000

3,120

10-29

Closing EntriesClosing EntriesUnearned Photocopy Fees Account No. 213

Date Item Post.

Ref.


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

2004

March

24

31Closing

$980

$980

$980

____

10-30

Closing EntriesClosing EntriesGeorge Ross, Capital Account No. 311

Date Item Post.

Ref.


Debit Credit

2004

March 3

31

31

Closing

Closing

$980

$20,000

7,079

$20,000

27,079

26,099


Date Item Post.

Ref.


Debit Credit

2004

March

31

31

31

Closing

Closing

Closing

$2,821

7,079

$9,900 $9,900

7,079

_____

10-31

Closing EntriesClosing EntriesPhotocopy Fees Earned Account No. 411

Date Item Post.

Ref.


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

2004

March

25

31 Closing

$1,100

$1,100

$1,100

_______

10-32

Closing EntriesClosing EntriesUtility Expense Account No. 512

Date Item Post.

Ref.


Debit Credit

2004

March 29

31

Closing

$230

$230

$230

______

Telephone Expense Account No. 513

Date Item Post.

Ref.


Debit Credit

2004

March

31

31 Closing

$120

$120

$120

______

10-33

Closing EntriesClosing EntriesPhotocopy Supplies Expense Account No. 516

Date Item Post.

Ref.


Debit Credit

2004

March 31

31

Adjusting

Closing

$500

$500

$500

______

Office Supplies Expense Account No. 517

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$300

$300

$300

______

10-34

Closing EntriesClosing EntriesRent Expense Account No. 514

Date Item Post.

Ref.


Debit Credit

2004

March 31

31

Adjusting

Closing

$400

$400

$400

______

Insurance Expense Account No. 515

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$50

$50

$50

______

10-35

Closing EntriesClosing EntriesDepreciation Expense, Photocopy Equipment Account No.542

Date Item Post.

Ref.


Debit Credit

2004

March 31

31

Adjusting

Closing

$33

$33

$33

______

Depreciation Expense, Office Equipment Account No. 543

Date Item Post.

Ref.


Debit Credit

2004

March

31

31

Adjusting

Closing

$88

$88

$88

______

10-36


Once posted to the ledger

Revenue

Expense

Withdrawals

ZERO

The next accounting period

10-37

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.

10-38

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

10-39

WE ARE SAILING RIGHT ALONG!!

closing entries

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