Question

How do closing entries simplify recordkeeping? Give an example of an adjusting entry that could is closed. :) .

Answer 1

How do closing entries simplify recordkeeping?

Ans:

Closing entries are made to close temporary accounts such as revenue, expense, dividends and withdrawals.

These accounts does not roll over for next period', so accountants make the closing entries to close the these accounts.

The closing process reduces revenue, expense, and dividends account balances (temporary accounts) to zero

so they can record and capture data for the next accounting period.

Closing entries make it simple to record data for each financial year separately so that we can know the revenue, expense for each period.

Example:

There are mainly four closing entry.

Date	Account Name	Debit	Credit
1.	Revenue
	To Income Summary
	(To close revenue account)
2.	Income Summary
	To Expense
	( To close expense account)
3.	Income summary
	To Retained Earning
	( to close income summary account)
4.	Retained Earnings
	To Div.
	(To close div. account)