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CLOSING ENTRIES

CLOSING ENTRIES. Chapter 9. Close Sales. Sales. INCOME SUMMARY. Normal Balance. Decrease OE Increase OE. JOURNAL ENTRY Nov. 20 Sales xxx Income Summary xxx. Close Expenses. Expense Account. INCOME SUMMARY. Normal Balance. Credit balance exists because we

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CLOSING ENTRIES

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  1. CLOSING ENTRIES Chapter 9

  2. Close Sales Sales INCOME SUMMARY Normal Balance Decrease OE Increase OE JOURNAL ENTRY Nov. 20 Sales xxx Income Summary xxx

  3. Close Expenses Expense Account INCOME SUMMARY Normal Balance Credit balance exists because we just CREDITED it from SALES closing Expense Account What results in income summary is either a net income (if credit balance/sales were higher) or net loss (if debit balance/expenses were higher) Normal Balance JOURNAL ENTRY Nov. 20 Income Summary xxx Expense Account xxx Expense Account xxx

  4. TIP • What might help you is to now POST. See what balance you have in Income Summary. Is it a DR or a CR? • To close it, do the OPPOSITE to bring it down to ZERO.

  5. Close Income Summary IF NET INCOME INCOME SUMMARY Owner, Capital Normal Balance Credit balance (More Sales Than Expenses) We’re adding The PROFIT Back into Our capital! Increase an OE Decrease an OE JOURNAL ENTRY Nov. 20 Income Summary xxx Owner’s Capital xxx

  6. Close Income Summary IF NET LOSS INCOME SUMMARY Owner, Capital Normal Balance Debit balance (More Expenses Than Sales) We’re taking the LOSS out of our capital! Decrease an OE Increase an OE JOURNAL ENTRY Nov. 20 Owner, Capital xxx Income Summary xxx

  7. Close Drawing Owner, Capital Owner, Drawing Debit balance Normal Balance We’re taking the DRAWING out of our capital! Decrease an OE Decrease in Contra OE (inc in OE) JOURNAL ENTRY Nov. 20 Capital xxx Drawing xxx

  8. After closing entries… • Sales account = $0 balance • Expenses = $0 balance each • Income Summary = $0 balance • Drawing = $0 balance • CAPITAL WILL BE ADJUSTED • Increased by Net Income OR Decreased by Net Loss • Decreased by Drawing

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