The Basics of Closing
Journal entries made to reduce to zero the balances in the temporary accounts.
Closing Entries
It is used to accumulate and summarize revenues and expenses for the period.
Income summary account
The first step: Transfer the balances of all revenue accounts to the credit side of this account
income summary
To reduce the Delivery Revenue account balance of $2,650 to zero, this side of the account must be used.
Debit side
What is the capital of Australia?
Canberra
This is transferred to the capital account when the temporary accounts are closed.
Net income or net loss
Revenues are transferred to the Income Summary account using this journal entry action.
credit
The step that requires transferring all expense account balances to the debit side of the Income Summary account.
step 2
This total amount ($1,500) must be entered as a ______ to the Income Summary account because expenses are transferred to the Income Summary as this.
debit
Who composed the famous piece “Fur Elise”?
Bethoven
The date that must be used in the journal when recording a closing entry.
Last day of the accounting period
Because it is only used at the end of the accounting period, it does not have this specific characteristic.
What is a normal balance (or an increase/decrease side)?
This is the temporary account that is closed directly to the Capital account in the final step
What is the Withdrawals account?
The transfer of $1,150 (net income) requires a credit to Crista Vargas Capital and a debit to...
income summary
Which country won the FIFA World Cup in 2022?
Argentina
Closing entries are one step in completing this larger cycle.
Accounting cycle
The balance of the Income Summary account will equal this.
net income or net loss
This is the final action taken in Step 4 when closing withdrawals.
What is transferring the balance of the withdrawals account to the debit side of the capital account?
The $500 balance of C. Vargas Withdrawals must be transferred to the Capital account using this journal action, reflecting a decrease in owner's equity.
What is a debit to C. Vargas Capital credit to withdrawals.
In what country would you find the city of Timbuktu?
Mali
This account, which acts as a simple income statement in the ledger, is unique among ledger accounts because it is used only at the end of the period, does not have a normal balance, and never appears on any financial statements
Income summary
The Income Summary account does not appear on any of these.
Any financial statement
These four types of temporary accounts—which include all accounts mentioned in Steps 1, 2, 3, and 4—must be successfully reduced to a zero balance upon the completion of all closing procedures
Revenue, Expenses, Income summary, Withdrawals
The ultimate goal of all four conceptual closing steps is to ensure the temporary accounts have this specific characteristic at the start of the new fiscal period.
balance of zero
In what country is it common to find square watermelons?
Japan