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Closing entries Search

January 10, 2019

Value Packs
Controller Library Value Pack
Closing entries are those journal entries made in a manual accounting system at the end of an accounting period to shift the balances in
CFO Library Value Pack
temporary accounts to permanent accounts. Bookkeeper Library Value Pack
Financial Analysis Value Pack
Examples of temporary accounts are the revenue, expense, and dividends paid accounts. Any account listed in the balance sheet (except for
dividends paid) is a permanent account. A temporary account accumulates balances for a single accounting period, whereas a permanent Accounting Bestsellers
Accountants' Guidebook
account stores balances over multiple periods.
Accounting Controls Guidebook
Accounting for Casinos & Gaming
For example, a closing entry is to transfer all revenue and expense account totals at the end of an accounting period to an income summary Accounting for Inventory
account, which effectively results in the net income or loss for the period being the account balance in the income summary account; then, Accounting for Managers
you shift the balance in the income summary account to the retained earnings account. As a result, the temporary account balances are reset Accounting Information Systems
Accounting Procedures Guidebook
to zero, so that they can be used again to store period-specific amounts in the following accounting period, while the net income or loss for
Agricultural Accounting
the period is accumulated in the retained earnings account.
Bookkeeping Guidebook
Budgeting
It is also possible to bypass the income summary account and simply shift the balances in all temporary accounts directly into the retained CFO Guidebook
earnings account at the end of the accounting period. Closing the Books
Construction Accounting
Cost Accounting Fundamentals
As an another example, you should shift any balance in the dividends paid account to the retained earnings account, which reduces the
Cost Accounting Textbook
balance in the retained earnings account. This resets the balance in the dividends paid account to zero. Credit & Collections
Fixed Asset Accounting
The following journal entries show how closing entries are used: Fraud Examination
GAAP Guidebook
Governmental Accounting
1. Shift all $10,000 of revenues generated during the month to the income summary account:
Health Care Accounting
Hospitality Accounting
Debit Credit IFRS Guidebook
Lean Accounting Guidebook
Revenue 10,000 New Controller Guidebook
Nonprofit Accounting
Income summary 10,000 Oil & Gas Accounting
Payables Management
Payroll Management
Public Company Accounting
2. Shift all $9,000 of expenses generated during the month to the income summary account (there is assumed to be just one expense Real Estate Accounting
account):
Finance Bestsellers
Business Ratios Guidebook
Debit Credit
Corporate Cash Management
Income summary 9,000 Corporate Finance
Cost Management
Expenses 9,000 Enterprise Risk Management
Financial Analysis
Interpretation of Financials
Investor Relations Guidebook
3. Shift the $1,000 net profit balance in the income summary account to the retained earnings account: MBA Guidebook
Mergers & Acquisitions
Treasurer's Guidebook
Debit Credit

Income summary 1,000 Operations Bestsellers

Constraint Management
Retained earnings 1,000 Human Resources Guidebook
Inventory Management
New Manager Guidebook
Project Management
Once you have completed and posted all closing entries, the final step is to print a post-closing trial balance, and review it to ensure that all Purchasing Guidebook
entries were made correctly.
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All modern accounting software automatically generates closing entries, so these entries are no longer required of the accountant; it is to receive monthly course
discounts *
usually not even apparent that these entries are being made.

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