After Break Review Closing Entries

Income Summary KEY Facts… Increases on credit side when revenue is closed into the account Decreases on debit side when expenses are closed into the account Returns to ZERO balance when closed into the Capital account. Income Summary Revenue Amount Expense Total Close balance into Capital

If after closing the expense accounts, Income Summary… Debit Balance = Net Loss Credit Balance = Net Income It WILL match the net income or loss from the Income Statement!

Closing Income Summary with a net income Income Summary 29,000 Capital 29,000

Closing Income Summary with a net loss… Capital 29,000 Income Summary 29,000

Account Review Revenue Accounts Expense Accounts Income Summary Always have a credit balance Always debit to close Expense Accounts Always have a debit balance Always credit to close Income Summary Reflects net income/loss Drawing Always has a debit balance

Permanent vs. Temporary Permanent—Not closed at the end of the accounting period! Temporary—”Closed” at the end of the accounting period, balances will return to zero for the next accounting period. ASSETS LIABILITIES CAPITAL REVENUE EXPENSES DRAWING

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Give it a try... Account Normal Balance To Close Salary Expense Unexpired Insurance Consulting Fees Depreciation Expense Drawing Capital Interest Revenue Accumulated Depreciation Income Tax Expense DR CR DR NA CR DR DR CR DR CR CR NA CR DR CR NA DR CR