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LESSON 6-1

Closing Entries
CLOSING ENTRIES

- are those journal entries made in


a manual accounting system at the
end of an accounting period to shift
the balances in temporary accounts to
permanent accounts.
Closing journal entries are made at the end
of the accounting period to prepare temporary
accounts for the next period.

Temporary or Nominal Accounts

- (also called income statement accounts),


are measured periodically.

Income Summary Account


is a temporary account which facilitates
the closing process.
Temporary accounts include:

Revenue, Income and Gain Accounts


Expense and Loss Accounts
Dividend, Drawings or Withdrawals Accounts
Income Summary Account
Four Steps in Preparing Closing Entries

Close all income accounts to Income


Summary.
Close all expense accounts to Income
Summary.
Close Income Summary to the appropriate
capital account.
Close withdrawals to the capital account/s
(this step is for sole proprietorship and
partnership only.)
CLOSE THE INCOME ACCOUNTS

Since income accounts have normal credit


balances,each revenue account will have to be
debited in the amount of the balance to bring
their balances to zero.The credit is made to
the income summary account.
CLOSE THE EXPENSE ACCOUNTS

Expense accounts have normal debit


balances,each of those will have to be credited to
close the account.Thus,a compound entry is
needed considering the number of expense
accounts.The total of all expense accounts is
then debited to income summary.
CLOSE THE INCOME SUMMARY TO CAPITAL

Notice that after posting the entries involving and expense


accounts,the balance of the income summary account is exactly
the net income or net loss for the period.A credit balance indicates
a net income and a debit balance indicates a net loss.Regardless
of whether the business yields a net income or a net loss,the
income summary account must be closed to the capital account.
CLOSE THE DRAWING ACCOUNT

The drawing account represents the amount


withdrawn by the owner either in cash and non-
cash assets for personal use. It is for this
reason that the debit balance of the drawing
account should be closed to capital.
Example Of Closing Entries
Answer the following:

1. It is a temporary account which facilitates the closing


process.

2. Are those journal entries made in a manual accounting


system at the end of an accounting period .

3.Also called income statement accounts,are measured periodically.

4.)Give atleast one temporary account.

5.Give atleast one step in preparing closing entries.


Submitted By:
Aira Joy S. Garcia.

Submitted To:
Maam Wilhelmina Roman.

11 ABM - B

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