Question

James Closing Entries Practice Problem

Prepare closing entries in the format used by accountants. To do this, close the revenue, expense, and drawing accounts in the following order:

(a) Close the revenue account to Income Summary.

(b) Close the expense accounts to Income Summary.

(c) Make sure that the balance in Income Summary equals net income. If it doesn’t, correct entries from (a) or (b).

(d) Close Income Summary to Capital.

(e) Close the drawing account to Capital.

After you have completed all the entries, compute the balance in the capital account.

Service Revenue
	Bal 3,500

James, Drawing
Bal   1,200

Salaries Expense
Bal 1,400

Income Summary

Rent Expense
Bal600

James, Capital
	Bal 10,000

Answer 1

(a) Close the revenue account to Income Summary.

Description	Debit $	Credit $
Revenue	3500
Income Summary		3500
(to Close the revenue account to Income Summary.)

________________________________________

(b) Close the expense accounts to Income Summary.

Description	Debit $	Credit $
Income Summary	2000
Salaries Expense		1400
Rent Expense		600
(to Close the expense accounts to Income Summary..)

__________________________________________

(c) Make sure that the balance in Income Summary equals net income. If it doesn’t, correct entries from (a) or (b).

Income Summary
Salaries Exp      1400	Revenue    3500
Rent Expense   600
Bal.(NI)   1500

____________________________________________

(d) Close Income Summary to Capital.

Description	Debit $	Credit $
Income Summary	1500
James Capital		1500

___________________________________________________

(e) Close the drawing account to Capital

Description	Debit $	Credit $
James Capital	1200
James Drawing (-)		1200

James, Capital
Withdrowal                   1200	Opaning Bal            10,000
Closing Balance              10,300	Income summary     1500