1. After Break Review
Closing Entries

2. 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

3. 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!

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

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

6. 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

7. 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

8. 2 1 3 4

9. 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