16 - Closing the Books at the End of the Period (The Closing Process)

02.02.2019 - By Accounting 101 with Jimmy Stewart

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Example: You own a sole proprietorship. For this period, you had revenue of $100,000, wage expense of $40,000, and computer expense of $30,000 (net income of $30,000). You also contributed $10,000 to the business this period.
Step 1 – Transfer Revenue and Expense items to Income Summary
                                                             Debit           Credit
Revenue                                        $100,000
            Income Summary                                  $100,000
Income Summary                       $40,000
           Wage Expense                                           $40,000
Income Summary                       $30,000
           Computer Expense                                  $30,000
Step 2 – Transfer Income Summary to Equity (capital account)
                                                                  Debit           Credit
Income Summary                            $30,000
           Capital Account – YOUR NAME                 $30,000
Step 3 – Transfer contribution/distribution accounts to capital account
                                                            Debit          Credit  
Contributions – YOUR NAME     $10,000
          Capital Account – YOUR NAME           $10,000
      

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