Merchandising Closing Entries

Chapter 6 closing entries
As you can remember from completing the accounting cycle there are four closing entries the very
first closing entry is to close revenue accounts to income summary
We will list all revenue accounts individually total them and credit the income summary account
for the total amount For the second journal entry we will close
all expense accounts listing them individually then total them and debit income summary for
the total amount of expenses I want you to remember that for the purposes
of sales returns and allowances and sales discounts.
While they are contra revenue accounts they are still closed with the expense accounts
because they have a normal debit balance. The third journal entry in closing is to close
the income summary to capital A common mistake here is to think that you’re
closing capital The $75,400 here that we are closing income
summary to capital represents the net income which is the difference between $720,785 in
revenue and $645,385 in expenses The income summary account is closed to capital
by debiting income summary and crediting the capital account
If there is a net income If there is a net loss we will debit the capital
account and credit the income summary The final journal entry for closing is to
close the drawing account You will debit capital for the amount of the
draw You will credit the drawing account to bring
this account to a close Once this is completed you can then create
a post closing trial balance

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