Question

In: Accounting

What are the steps to the closing process and do we post these entries?

What are the steps to the closing process and do we post these entries?

Solutions

Expert Solution

Solution:

In the wake of chronicle monetary exchanges all month, the bookkeeping staff needs to play out the end procedure so as to conclude the money related records for the month and set up the records for the next month. Each business utilizes impermanent records, or income and cost records, which enables the organization to record the complete exercises in those records for the month.

The motivation behind the end procedure is to finish off the equalizations in those records, enabling them to begin with a parity of zero the following month. The end procedure of the bookkeeping cycle comprises of four stages.

Close Revenues :

The initial phase in the finishing procedure includes cutting off all income accounts. The bookkeeper surveys every income account and recognizes each record with a parity. Organizations record all exchanges utilizing charges and credits. Income accounts keep up ordinary credit adjusts. The bookkeeper finishes off the incomes by charging each record for the consummation balance. The bookkeeper credits a record called Income Summary for the all out charges recorded for the income accounts.

Close Expenses :

The second step in the finishing procedure includes cutting off all cost records. The bookkeeper audits each cost record and the records with a parity more than zero. Cost accounts keep up typical charge adjusts. The bookkeeper finishes off the costs by crediting each record for the consummation balance. The bookkeeper charges a record called Income Summary for the absolute credits recorded for the cost records.

Close Income Summary :

The Income Summary record exists just amid the end procedure to zero the income and cost records. Subsequent to shutting those records, the bookkeeper needs to close the Income Summary record. The bookkeeper decides the equalization in this record by inspecting the initial two shutting sections. The overall gain provided details regarding the pay explanation meets incomes less costs and should break even with the parity in the Income Summary record.

On the off chance that the Income Summary record has a charge balance, the bookkeeper should credit this record for the equalization and charge Retained Earnings. On the off chance that the Income Summary record has a credit balance, the bookkeeper should charge this record for the parity and credit Retained Earnings.

Close Dividends :

The last section in the end procedure considers the profits announced amid the period. Profits speak to an arrival of value and begin at zero every period. Profits have a typical charge balance. The bookkeeper shuts the Dividend account by crediting the Dividend account and crediting Retained Earnings for the equalization.

.

We get ready shutting passages for the brief records, for example, the income and cost records (see prior Q&A). The end passages are recorded after the fiscal summaries for the bookkeeping year are readied. The explanation behind the end passages is to guarantee that every income and cost record will start the following bookkeeping year with a zero parity.

The end passages necessitate that a charge be gone into every one of the impermanent records having a credit balance. The charge entered must be actually the measure of the credit balance preceding the end section. The goal is to get the record equalization to be zero.

The end passages likewise necessitate that a credit be gone into every one of the transitory records having a charge balance. The credit sum that is entered must be actually the measure of the charge balance before the end section.

The net measure of the charges and credits in the end sections for the salary proclamation accounts is the measure of the pay or deficit. This net sum will finish up in a critical position sheet account Retained Earnings (some portion of investors' value of a company) or in the proprietor's capital record (some portion of proprietor's value in a sole ownership). In manual frameworks, there is frequently an Income Summary record before the passage into the value account.


Related Solutions

Why are closing entries important to the closing process?
Why are closing entries important to the closing process?
how to do closing entries
how to do closing entries
Why does the Capital on Post-closing Trial Balance increase? How to convert Journalize&Post the closing entries...
Why does the Capital on Post-closing Trial Balance increase? How to convert Journalize&Post the closing entries into Post-closing Trail Balance?
Exercise 4-6 Preparing closing entries and the post-closing trial balance LO2,3,4 CHECK FIGURE: Post-closing trial balance...
Exercise 4-6 Preparing closing entries and the post-closing trial balance LO2,3,4 CHECK FIGURE: Post-closing trial balance columns = $51,300 The adjusted trial balance at April 30,2017 for Willard Co. follows Debit Credit 101 Cash 3,600 106 Account receivable 8,500 153 Trucks 26,000 154 Accumulated depreciation, trucks 8,250 193 Franchise 13,200 201 Accounts Payable 9,600 209 Salaries Payable 3,200 233 Unearned Revenue 1,300 301 Sid Willard, capital 29,100 302 Sid Willard, withdrawals. 9,600 401 Plumbing Revenue 42,050 611 Depreciation Expense, Trucks...
Explain the process of closing the books and describe the content and purpose of a post-closing...
Explain the process of closing the books and describe the content and purpose of a post-closing trial balance. Answer in our own words and must be at least 200 words.
Briefly discuss the purpose for the closing process and describe the four closing entries that are...
Briefly discuss the purpose for the closing process and describe the four closing entries that are required to be made in that process. Also, discuss the difference between a temporary and a permanent account.
can someone explain what is and what includes in a closing entries.  and show a closing entries...
can someone explain what is and what includes in a closing entries.  and show a closing entries example.
Closing Entries and Post-Closing Trial Balance Refer to the work sheet below for Megaffin’s Repairs to...
Closing Entries and Post-Closing Trial Balance Refer to the work sheet below for Megaffin’s Repairs to complete this problem. Megaffin's Repairs Work Sheet For Month Ended January 31, 20-- Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash 3,675 3,675 3,675 Accounts Receivable 1,452 1,452 1,452 Supplies 695 296 399 399 Prepaid Insurance 899 220 679 679 Delivery Equipment 3,230 3,230 3,230 Accumulated Depreciation - Delivery...
I just need the closing entries and post closing trial balance for this question. Henrietta’s Pine...
I just need the closing entries and post closing trial balance for this question. Henrietta’s Pine Bakery Background You are an Analyst for the professional service firm, FINACC LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. Given the outstanding feedback you received on your first engagement working for Big Spenders Inc., a Senior Manager in the Financial Advisory group requested your support on a compilation engagement. Additional Information Henrietta’s was established in...
James Closing Entries Practice Problem Prepare closing entries in the format used by accountants. To do...
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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT