Closing entries
At the end of the accounting period we make the adjusting entries and than we make the adjusting trial balance.Than we close the accounts after adjusting trial balance at the end of the accounting period.we close the all revenue and all expense account in a temperary account name as income summary account.we also close dividend account in retain earning account.And at the end we close the income summary account into retain earning account.we can explain these closing entries with the help of simple entries.
1.Closing entry of revenue.
We know that revenue has always credit balance so we close the revenue account by making the revenue account debit and income summary account credit.
Revenue account
Income summary account
2.Closing entry of expense.
We know that all the expenses that are made by a business during the accounting period have debit balance so we close the expense account by making them credit and income summary account as debit.
Income summary account
expense account
3.closing entry of income summary.
We close the income summary account into the retain earning.If the income summary has debit balance than it is make credit and close into retain earning and it has credit balance than it make debit and close into retain earning.
Retain earning
income summary account
income summary account
Retain earning
4.Closing dividend account.
we know that dividend is not our expense and it is also not revenue it is countra entry and it has debit balance so we close this by making this credit and close into retain earning.
Retain earning
Dividend account
At the end of the accounting period we make the adjusting entries and than we make the adjusting trial balance.Than we close the accounts after adjusting trial balance at the end of the accounting period.we close the all revenue and all expense account in a temperary account name as income summary account.we also close dividend account in retain earning account.And at the end we close the income summary account into retain earning account.we can explain these closing entries with the help of simple entries.
1.Closing entry of revenue.
We know that revenue has always credit balance so we close the revenue account by making the revenue account debit and income summary account credit.
Revenue account
Income summary account
2.Closing entry of expense.
We know that all the expenses that are made by a business during the accounting period have debit balance so we close the expense account by making them credit and income summary account as debit.
Income summary account
expense account
3.closing entry of income summary.
We close the income summary account into the retain earning.If the income summary has debit balance than it is make credit and close into retain earning and it has credit balance than it make debit and close into retain earning.
Retain earning
income summary account
income summary account
Retain earning
4.Closing dividend account.
we know that dividend is not our expense and it is also not revenue it is countra entry and it has debit balance so we close this by making this credit and close into retain earning.
Retain earning
Dividend account
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