2.  All temporary accounts must be “closed” at the end of an accounting cycle ◦ This prepares them for the next fiscal period.  Closing a temporary account reduces the account balance to zero.  Sales Revenue, all expense accounts, Owner’s Withdrawal and Income Summary are temporary accounts. ◦ Income Summary is a special temporary account and used as a means of transferring the profit or loss from business operations to the Owners Capital (Owner’s Equity) account.

3.  Recorded first in the General Journal  Like all journal entries, they are then posted to the appropriate ledger accounts. ◦ The result is to “zero out” all temporary accounts preparing them for the next fiscal period.

4.  Complete all closing entries for the fiscal period  In the Multicolumn Journal write “Closing Entries” as a heading in the Item Column ◦ The rows that follow are used to record any necessary closing entries  All closing entries should be dated the last day of the fiscal period.

5.  Journalize all closing entries for the sample case  Once the closing entries are recorded in the journal, post them to the General Ledger and determine the ending balances for each account. ◦ See General Ledger solutions

6.  The Post-closing Trial Balance should reflect the ending account balances after posting the adjusting and closing entries.  Balances should occur in the Asset accounts, the Liability account(s), and the, Capital account.  There should be a zero balance in the, Drawing; Sales Revenue; Income Summary; and all Expense accounts  See Post-closing Trial Balance solution file