Closing Entries

The closing entry is used to transfer data in the temporary accounts to the permanent balance sheet or income statement accounts.so at the end of accounting period necessary to close the temporary accounts and this balance transfer in to income summary and retained earning account .

closing entries are :

1-debiting revenue and crediting income summary.

2-by debiting income summary and crediting expense.

3-by debiting income summary and crediting retained earnings.

4-by debiting retained earnings and crediting dividends.

• close revenue to income summary :

to close revenue accounts we will see revenue accounts with credit balances .

Date          Account                                  Debit                Credit

XX                     Revenue                           XX

                                       Income summery                            XX

• Close expense to income summary :

to close the expense account you have to credit your all expense 


Date           Account                                 Debit                   Credit
XX                     Income summery                 XX
                                        expense                                          XX

• Close income summary to retained earning :

to close the income summery account you have to debited income summery account and credited the retained earning accounts .

Date           Account                                 Debit                    Credit
XX                   income summery                  XX
                                   retained earning                                     XX

and if we get a debit (lose) balance then The income summary account  is closed to retained earnings.

Date         Account                                  Debit                    Credit
XX                  Retained Earning                   XX                        
                                 Income summery                                    XX

• Close dividend to retained earning:

the dividends account is closed to retained earnings and make its balance zero.

Date       Account                               Debit                        Credit
XX                 Retained earning                   XX
                                   Dividend                                                  XX