1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 16-2 Recording Closing Entries for Income Statement Accounts

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 16-2 THE INCOME SUMMARY ACCOUNT page 487

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Closing Entries for Corporations FOUR CLOSING ENTRIES 1.Closing Entry for Income Statement accounts with CREDIT Balances (Revenue and Contra Cost Accts.) 2.Closing Entry for Income Statement accounts with DEBIT Balances (Cost, Contra Revenue, Expenses) 3 LESSON 16-2

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Closing Entries for Corporations 3.Closing Entry to record Net Income or Net Loss into the “Retained Earnings” Account and CLOSE the Income Summary Account 4.Closing Entry for the Dividends Account All closing entries come from the Income Statement & Balance Sheet columns of WS 4 LESSON 16-2

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 16-2 CLOSING ENTRY FOR ACCOUNTS WITH CREDIT BALANCES 1 2 page 488 3.Debits to close 4 1.Heading 2.Date4.Credit to Income Summary 33

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 16-2 CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES 1 24 page 489 3.Credits to close 1.Date 2.Account debited 4.Debit amount 3 3

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 16-2 SUMMARY OF CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES page 490 Bal.209,960.00Closing 209,960.00 (New Bal. zero) Purchases Adj. (mdse. inv.)15,840.00Closing (credit amounts)500,253.10 Closing (debit accounts)404,099.15(New Bal.80,313.95) Income Summary

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 16-2 CLOSING ENTRY TO RECORD NET INCOME page 491 1 2 3 3.Credit Retained Earnings 1.Date 2.Debit Income Summary The Net Income AFTER Taxes is Closed into the Retained Earnings Account with a CREDIT Increase

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 16-2 CLOSING ENTRY FOR DIVIDENDS page 491 3.Credit Dividends 1.Date 2.Debit Retained Earnings 1 2 3 Closing Dividends is similar to closing the Drawing Account with the sole proprietorship. It LOWERS the Retained Earnings or Net Income.

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 16-2 COMPLETED CLOSING ENTRIES FOR A CORPORATION RECORDED IN A JOURNAL page 492

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Audit Your Understanding 1.Where is the information obtained for journalizing closing entries for revenue, cost, and expenses? 2.What is the name of the temporary account that is used to summarize the closing entries for revenue, cost, and expenses? 11 LESSON 16-2