1. Concepts and Practices

2.  Last stage in the accounting cycle is to prepare the accounts for the next period by transferring the results of business operations and owner’s withdrawals to Capital.

3.  Real accounts continue from one period to another  Real accounts are assets, liabilities, and Capital  Nominal accounts have balances that do not continue from one period to another  Nominal accounts are revenue and expense accounts with the addition of Drawings

4.  Used only for closing entries  Nominal accounts are closed into Income Summary to collect information  Income Summary is then closed to Capital

5.  Nominal accounts need to have a balance of zero at the end of the fiscal period in order to collect only one period’s information  Net income will be transferred to Capital via the Income Summary account  Drawings are closed directly to Capital

6. Four steps: 1. Close revenue (income statement credit column) to Income Summary 2. Close expenses (income statement debit column) to Income Summary 3. Close Income Summary to Capital (this amount will be net income or loss) 4. Close Drawings to Capital

8. Closing Revenue—to make it zero, you will debit Fees Earned

9. DateParticularsPRDRCR Dec 31Fees Earned60 300-- Income Summary60 300-- Close revenue Use Income summary to collect information

10. Closing Expenses—to make them zero, you will credit them

11. DateParticularsPRDRCR Dec 31Fees Earned60 300-- Income Summary60 300-- Close revenue 31Income Summary38075-- Car Expense3875-- General Expense3050-- Miscellaneous Expense700-- Rent Expense7200-- Wages Expense22000-- Supplies Expense300-- Insurance Expense950-- Close expenses Journal after closing revenue and expenses

12. Closing Income Summary –transferring net income to Capital

13. DateParticularsPRDRCR Dec 31Fees Earned60 300-- Income Summary60 300-- Close revenue 31Income Summary38075-- Car Expense3875-- General Expense3050-- Miscellaneous Expense700-- Rent Expense7200-- Wages Expense22000-- Supplies Expense300-- Insurance Expense950-- Close expenses 31Income Summary22225-- P. Tang, Capital22225-- To close income summary and transfer net income to Capital Closing Income Summary to Capital

14. Closing Drawings—to make it zero, you will debit Capital to show that it has been decreased by Drawings

15. DateParticularsPRDRCR Dec 31Fees Earned60 300-- Income Summary60 300-- Close revenue 31Income Summary38075-- Car Expense3875-- General Expense3050-- Miscellaneous Expense700-- Rent Expense7200-- Wages Expense22000-- Supplies Expense300-- Insurance Expense950-- Close expenses 31Income Summary22225-- P. Tang, Capital22225-- To close income summary and transfer net income to Capital 31P. Tang, Capital15000-- P. Tang, Drawings15000-- Close Drawings Closing Entries Completed

16. P. Tang and Company Post-Closing Trial Balance December 31, 2009 AccountsTrial Balance DRCR Bank1800 Accounts Receivable19500 Supplies700 Prepaid Insurance800 Equipment22000 Automobile21000 Accounts Payable4535 P. Tang, Capital61265 65800 Post-closing balance is prepared after the adjusting and closing entries have been journalized and posted. Only assets, liabilities, and capital should have balances. Everything else should be zero.