Additional Example

Closing temporary accounts in the case of net loss

It is December 31 and time for your business to close the books. The following balances
appear on the books of Sarah Simon Enterprises:

1. Drawing, $8,500.
2. Service revenue, $12,700.
3. Expense account balances: Salary, $6,100; Rent, $4,000; Advertising, $3,300.

Requirements

1. Journalize closing entries.

2. Post the closing entries to the accounts.
3. Compute the ending balance of Simon, capital (beginning balance 26,100).

Service Revenue 12,700

Income summary 12,700
Income summary 13,400
Salaries expense 6,100
Rent expense 4,000
Advertising expense 3,300
Simon, capital 700
Income summary 700
Simon, capital 8,500
Withdrawals 8,500

Service Revenue
12,700 12,700 Salaries expense
0 End. 6,100 6,100
End. 0
Income Summary
Rent expense
13,400 12,700
4,000 4,000
700
End. 0
700
0 End. Advertising expense
3,300 3,300
Simon, capital End. 0
700 26,100 Beg.
8,500
16,900 End.